34 banking
Has the lending landscape for the UK’s mid-market companies changed?
The funding landscape has changed significantly in recent years, giving more opportunity to the UK’s mid-market companies to fuel their growth ambitions, says Grant Thornton director James Stares. Though traditional banks have reduced the lending opportunity for certain sectors, they are still innovating and actively lending. Non-bank lending is growing, and the historic misconceptions that borrowing from such lenders is about distress are starting to subside. A recent survey by Grant Thornton has found that more than 60% of businesses in the mid-market already use non-bank lending as a source of finance
The survey ’Capital for Commerce – Fuelling growth through non-bank lending’* gives great insight from 100 UK-based, mid-market companies and 100 non-bank lenders. It reveals that the appetite for non-bank lending is stronger than previously thought. In fact, the search found that non-bank lenders complement rather than compete with banks.
So, what matters the most to corporates when selecting a lender? The findings show that access to capital (34%), followed by terms and pricing (23%), are most important. Surprisingly reputation (5%) and an existing relationship with the lender (10%) were the least.
The doors to using non-bank lenders are opening, however perception still creates a number of stumbling blocks to transacting with them, and the non-bank lenders openly admit that they have not actively taken any steps to raise their profiles directly among their potential
CORPORATES SELECTING A LENDER
Most important factors:
• Access to capital (34%) • Terms and pricing (23%) Least important factors
• Existing relationship with the lender (10%)
• Reputation (5%)
www.businessmag.co.uk
customers. It’s apparent that the banks offer a sense of security through familiarity, with some respondents quoting ’they are accustomed to the banks processes and functions’, and that ’banks are most organised and customer focused.’
So what does this mean?
Non-bank lenders have acknowledged that more needs to be done in terms of market perception and the lowering of the perceived barriers to entry for non-traditional sources of lending. Many feel that mid-market companies are beginning to look at alternative funding solutions with serious intent, and that resistance to explore these opportunities is beginning to subside.
Positive perceptions are beginning to emerge among finance directors,
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – OCTOBER 2014
particularly as non-bank lenders have upped their game in terms of internal functions, global recognition of the role they have played and speed of sanction.
In many ways, the economic recovery and reversal of downturn has stopped the further deterioration of the traditional banks’ financial position, and this, together with the emergence of non-traditional lenders, has created competition for business, a favorable outlook for mid-market companies with ambitions for growth.
Debt advisory firms like ourselves are regularly presenting opportunities across the funding landscape and our experience and awareness of the varied options, best tailored to the borrowers’ individual requirements, makes us ideally placed to provide guidance and support in this changing landscape.
* ’Capital for Commerce – Fuelling growth through non-bank lending’ is available to download from
www.grant-thornton.co.uk
Details: James Stares
james.w.stares@
uk.gt.com www.grant-thornton.co.uk
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