Where SMEs get financing

[Ray Newman]

Thought this report into SME financing was interesting. Amazing that we're still feeling the effects of the 2008 financial crisis in the willingness of banks to lend and the confidence businesses have in approaching them for finance.

General trend: people increasingly foregoing growth to avoid having to rely on others for funding.

I've added a poll on this purely out of nosiness.

 

[Mark T Jones]

The funding market is absolutely awash with lenders, including government sponsored schemes such as start up loans and EFG

banks are pretty hit and miss - the non bank market is booming

one big challenge is that prospective borrowers are ill- prepared and in too many cases expect easy money

 

[Ray Newman]

one big challenge is that prospective borrowers are ill- prepared and in too many cases expect easy money

The appeal of crowdfunding does seem to be in part a slightly higher appetite for risk among 'fans' who are willing to put a bit of money in for fun, or out of enthusiasm, with no particular expectation of a return.

 

[Martin Kennington]

I've worked in finance for the past seven years and even in that relatively short space of time, there's been a significant shift away from the banks. As Mark notes, the market is full of lenders ready to support SMEs at a time when the banks have just about closed their books.

Agree on crowdfunding - it's great for PR and creating evangelists but with a few exceptions (eg Camden Town Brewery), there's no evidence that investors are going to see any return.

I worry about the P2P market in the same way, with a lot of lenders in that space circling the drain - again, SMEs might be happy to take money from them, but it could all collapse when the investors try to withdraw.

The good news is there are lots of options for SMEs now, so hopefully they DON'T have to forego growth due to lack of available finance (at my company we've seen huge growth in demand from SMEs, particularly in the hospitality and retail sectors).

 

[Mark T Jones]

The appeal of crowdfunding does seem to be in part a slightly higher appetite for risk among 'fans' who are willing to put a bit of money in for fun, or out of enthusiasm, with no particular expectation of a return.

Yes, crowdfunding has ridden high on the back of massive publicity

that particular bubble is bursting and will find a realistic level over the next 18 months.

The big mismatch though is between borrow expectation and commercial reality

part of the role of a good broker like me) is to manage and clarify that gap

 

[Gordon - Commercial Finance]

The market is well served by specialist lenders where banks have bigger and "better" things to worry about. The markets that Mark and myself operate in are far more effectively served by specialists and if banks decided to rejoin the fray I think they would be doing SMEs a disservice because they just don't get it.

For unsecured business lending, the market is not so buoyant, and the issues with P2P lending in this space are soon coming to a head. However I reckon that just reflects the fact that secured lending is the sensible option, and far less lenders are willing to take the big risks on unsecured stuff because they know they will invariably be getting stung at some point.

Funding is available everywhere to SMEs, but most just don't seem to know where to look.

 

[Martin Kennington]

I wouldn't agree about the unsecured business lending space not being buoyant - my experience is quite the opposite; the market is doing very well indeed and I've seen a lot of new lenders enter this space.

For some, secured lending is the best solution - for others, unsecured is the best. Naturally, we're on opposite sides of that coin, but I do see the value in both.