Diversifying SMEs need expert support from brokers

Every single one of those firms is different and in a very true sense we’re seeing something of a shift in the types of SMEs in this country, with many more start-ups; the people behind them – more women now run their own firms; the way they work – remote and flexible working growing in popularity; the sectors they’re active in – greater use of technology expands the options available; and the commercial goods and services they trade in.

It makes dealing with SMEs as a homogenous group incredibly difficult. Indeed you might argue that for a lender to these businesses to try and act as if they were all the same, and to make lending decisions based on a demographic rather than an individual SME firm’s needs, is only going to end in poor decisions.

This is why we feel it’s so important to respond to those changes and the individual needs of those firms. Commercial funding demand remains high, especially after a period of uncertainty like we have had over the last two years and there are clearly a number of new considerations.

However, the fact remains that many businesses have very powerful stories and future prospects, yet a growing number of traditional banks are not willing to work with firms on an individual basis. They still want to use a tick-box approach to a commercial loan decision, whether that’s a mortgage or a working capital loan, and appear much more comfortable putting an algorithm into a computer and going with the ‘yes or no’ answer it generates.

Such an approach is likely to mean a very large number of disappointed SMEs, many of whom are very good at the business they are involved in, but not experts at securing the best commercial finance arrangements, hence the need for expert support from brokers.

Lenders really need to be more responsive to that individual firm’s requirement, and the only way you can do this is by forging a personal relationship with that business and getting under the skin of what it does, what it would like to do, and where we can help.

We’ve only been lending since the end of last year, but we’ve already come across a number of business cases which, quite frankly, would not have received funding via a traditional ‘computer says yes or no’ approach.

For example, we’ve worked with a first-time commercial landlord to invest in a retail property in the town where he grew up. Other lenders turned him down because of his young age and because he was seemingly lacking in experience, but having talked to him, read his business plan and seen his support network, we could see just how strong his investment case was.

We feel it is individuals and entrepreneurs like this that we have to support. Again, it’s a recognition that not every SME is the same, and the traditional notion of who should be running a business and what they need to get finance, might well be irrelevant. The fact they fully understood their local market and were working with excellent advisers was not even considered by other lenders, but it was what made this case even more compelling for us.

Importantly it’s also about working with local brokers and financial advisers who are much more likely to come across these cases regularly. We’ve funded a number of small, but successful and growing, family-run businesses, from a flower shop to a software company developing distance learning technology for schools.

Again, these play a real and positive role in their local communities and add a considerable amount to their local economies – by working with local advisers to help fund their needs we can get to the heart of what each SME is about and what it can do for, and within, it’s local area.

So, overall, what is required is a shift in perception and understanding, and a willingness to truly understand an SME and the people behind it. From that strong position, we can make commercial funding decisions that are different to the norm and, by doing so, we can help those business owners who remain the lifeblood of our economy.