In Focus Commercial Credit
>>
Well intentioned There are well-intended solutions –
such as the Bank Referral Scheme – that mandate that, when a bank declines to offer finance to an SME, they must refer that business to a group of designated platforms that can suggest alternative funding types and providers. There is an argument that would suggest
that this scheme has not delivered a huge amount of success, with around 5% by volume being converted to deals. That said, the numbers seem to be improving, albeit marginally, which is encouraging.
A greater purpose Alternative funders serve a great purpose; they can truly help businesses, and, as someone who has worked in this sector for years, it would be hypocritical for me to criticise them. However, when SMEs go to many funders,
they are often faced with challenges that they were not expecting. They are often frustrated with the level of information they have to provide, the time it takes to get the funds, the complexity of obtaining and adhering to facilities, and the level of security needed to service their funding.
Those who had to put personal security
were even more likely to avoid it. Unforeseen costs or charges also impact
hugely on the trust placed on their providers. Many businesses are considered ‘happy
non-borrowers’ because they simply do not believe they will obtain funding easily. And a combination of the hassle, time, effort, and potential hidden costs associated with obtaining funding can result in them not fully trusting their providers. Imagine an SME winning a huge contract
with a large solid, business. The euphoria of making such a sale to an SME would be massive, after all, it is what pays the
mortgage, puts food on the table, and will support the ongoing growth of the business. However, this euphoria can swiftly turn
into stress and anguish when they are often met with terms of payment from their customers, whereby they must wait 30, 60, or even 90 days and beyond before they get paid. This can be extremely tough. Ultimately, the only way to make this work is with the support of a form of funding.
Conclusion Many of us work for a great employer and do not have to worry about what is around the corner, as we will be paid at the end of the month. The owners of SMEs, on the other hand,
So, for this Christmas, why do we not give them the present of a payment on time (or even early if due after Christmas), removal of a personal guarantee if you are a funder, or a mechanism to get paid sooner?
often need to drive sales, recruit support when they need it, and then ensure that they have the funding to pay for everything, and everyone. What they achieve is amazing and represents the lifeblood of our economy. So, for this Christmas, why do we not give
them the present of a payment on time (or even early if due after Christmas), removal of a personal guarantee if you are a funder, or a mechanism to get paid sooner? That would be a truly Merry Christmas for SMEs! CCR
18
www.CCRMagazine.com
December 2018
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