Bank lending realities and tips to help you secure finance

The Touch Financial director shares finance sector insights on funding options for start-ups

Finance has been Simon Carter’s life for 20 years.

Prior to launching Touch Financial, now the UK’s largest independent invoice finance broker, he worked his way through senior positions as an underwriter, operations director, sales director and commercial director.

With Touch Financial now responsible for assisting more than 600 companies in exploring their finance options and raising more than £42m every year, Carter spent some time answering questions from Startups.co.uk about small business funding.

With the banks criticised for not lending to small businesses, what effect is this having on small businesses?

I’m not sure the idea banks don’t want to lend is entirely true. You only have to look in the papers, listen to the radio and watch the TV to see there is a push from main banks to fulfil their commitments to fund small businesses.

However, the reality is they are still somewhat constrained on delivering what they are marketing, and for good reason! In addition, many small businesses are suffering themselves from a lack of confidence in investment in growth.

These are the same businesses which perhaps have access to funds but are choosing not to draw.

To provide a meaningful answer, we need to segment the term SME into small, medium and larger and then again with low risk, medium risk and high risk.

Not rocket science but I believe that a small, high risk SME business will be facing an entirely different set of issues than a large, low risk SME in the same market.

Often this is lost in the soundbite commentary you see in the media!

What three pieces of advice would you give to small and mid-sized businesses that are looking to secure finance?

  1. Research your funding options. Speaking to your local bank should never be the ONLY option! There are many innovative lenders out there waiting to provide a cost-effective solution to your business. If you don’t research them then you won’t know what you don’t know and you won’t get what you need! Sounds confusing… it’s not… do your research or let someone do the hard work for you.
  2. Have a comprehensive business plan. If you know where you want to get to then you are more likely to get there. Applying for funding will often require you to sell your vision to any potential lender. It might be worth speaking to a specialist consultant (or a good accountant) to help you build the proposition to potential suitors.
  3. Know your history. Have you borrowed money previously either personally or through your business? Any worries about adverse information? Better to know and deal with this or at least have ‘the story’ in your mind for if you are asked. As an ex-underwriter it always amazed me that customers did not have a better handle on any adverse information. ALWAYS be honest and upfront with the lender. You might be surprised how this can affect the outcome of your application.

If you had to highlight one common problem small businesses come across when looking to secure funding, what is it and how can they prepare to avoid it?

The biggest problem is a lack of knowledge about alternative options other than banks. Always speak to your bank but never in isolation!

Bank managers nowadays are targeted to sell products and not to provide the best advice (in my view).

There is growing pressure to change this but it will never be the case that a bank manager has access to all of the solutions available in the market.

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