CCR2 Credit Risk Information
This starts with standard tasks, such as connecting companies, struggling with credit scores, with credit-management experts, or identifying the correct type of funding arrangement required to assist the business and putting them in touch with appropriate lenders who can help. However, it should not stop there
quickly match them to specific lenders who they know have an appetite to assist. For SMEs that have been turned down
for simple bank loans, it may be a better alternative to assess what assets the business has available which could be used as collateral for additional funding (short or longer term). Asset finance offers financial support
placed against high-value assets such as factory equipment or property. This gives the business security to place the debt against, creating a much more attractive environment for lenders to work in. Similarly, an unpaid sales ledger is a
perfect asset to generate additional funding under an invoice-finance facility. Trade finance can be used to help bolster
a company’s cashflow by helping to pay suppliers for goods which are to be sold onwards and bridging finance can be used to generate funds for a business using the equity in any property held. Benefits can be achieved by using brokers
working alongside flexible alternative lenders that can provide a wide variety of options to fit the needs of any SME. With the right partnerships in place, brokers could be the key to unlocking finance for so-called ‘high risk’ SMEs so they do not suffer in silence.
October 2018
High risk, high reward Actual high-risk SMEs are few and far between – most are businesses that do not quite meet set criteria, resulting in negative assumptions being made. By viewing these businesses as a real
opportunity, brokers can create long-term relationships with potential clients by constantly adding value through high-level business consultancy. This starts with standard tasks, such as
connecting companies, struggling with credit scores, with credit-management experts, or identifying the correct type of funding arrangement required to assist the business and putting them in touch with appropriate lenders who can help. However, it should not stop there. While this work is taking place, having
regular meetings with the aim of solving some of the issues that cause the business issues will ensure brokers are kept at front of mind. Such support can certainly go a long
way, especially with those SMEs that had been unfairly deemed ‘too high risk’ by lenders previously. In fact, it is likely the broker that takes them under their wing, supports them and
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connects them with the right lender will find themselves as the partner that SME turns to whenever they need help in the future. It will turn what could have otherwise
been a one-off interaction into a potential long-term relationship that may prove to be fruitful for both the business and for the broker.
Time for change The current business market is incredibly complex and SMEs are increasingly finding the need to seek financial support to hit their full potential. If this is met with a barrage of rejection
letters, it may have a very negative impact on the company both financially and in terms of morale. Brokers should, therefore, prioritise
working with flexible funding partners with a broad portfolio to increase the likelihood of turning high-risk SMEs into long-term clients. Doing so, while positioning themselves
as an indispensable business advisor will inevitably help everyone involved and create a more sustainable business environment. CCR2
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