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Bank Inefficiencies Still Hurting SMEs

23rd January 2017 By Katy Ford in Current Affairs

Last week we reported that we’ll be here to help SMEs turned away by Barclay’s new loans app. This week we add those turned away by Ammicus Commercial Finance’s innovative Intelligent Cashflow to the list of SMEs we can help …

Cambridge Evening News’s Mike Scialam reported on research by alternative finance provider, Ammicus Commercial Finance (ACF) this week, revealing that, of those who have used the bank to help them support their business with working capital or overdraft facilities, nearly a third (30%) wouldn’t describe the bank as ‘helpful’ and nearly half (46%) of SME owners suggested they wouldn’t describe them as ‘flexible’.

‘Helpful’ and ‘flexible’ are values built into the DNA of Responsible Finance Providers (RFPs) like Foundation East, which is why think tank Civilitas, pushed for the government to increase its funding stream to them in its report earlier this month. This report was more positive than ACF’s, pointing out overall improvements in Access to Finance for SMEs since the 2008 financial crisis, yet flagging up a massive funding gap for three types of SMEs: very small businesses; those with a worse than average risk rating and start-ups.

Indeed, according to Civilitas, 66 per cent of businesses with zero employees, 52 per cent of those with a worse than average risk rating, and 45 per cent of start-ups were successful in their loan application between 2015 and 2016. This differs drastically with the number of large SMEs (97%), those with a minimal risk rating (98%), and those seeking a renewal (100%) that were successful. Overdraft applications follow the same pattern.

According to the Federation for Small Businesses, ‘banks cannot be expected to design and provide products and services to meet the needs of all types of smaller businesses.’ Instead, other finance providers are required to help plug the funding gap.

Civilitas called on the government to inject more capital into its Regional Growth Fund, providing RFPs with much needed capital to fill the gap, since they have a proven model for so doing.

As a RFP we agree with Civilitas (obviously), yet welcome new developments serving those businesses turned away by mainstream finance, such as ACF’s new Intelligent Cashflow product.

Indeed, we’ll signpost SMEs coming to us who need working capital to ACF, if its Intelligent Cashflow meets responsible lending criteria. And, of course, we’re here to help those that do not meet ACF’s criteria to find funding elsewhere.

Why do we continue to help businesses turned away by mainstream finance?

Because, like all RFPs, Foundation East is more than just a lender. We provide mentoring and expert business support too, the type of support that makes business dreams come true, as evidenced by our growing number of success stories. And because, as pointed out in my previous blog, SMEs are vital to the UK economy and their lack of finance is resulting in lost output, employment and economic growth. Foundation East exists to drive economic growth and the associated increases in taxes collected and lives improved. In fact, for every £1.00 we invest, we generate £15.68 of social and economic value.

If you, like us, believe in truly fair finance for all, please share this post via Linked In and Twitter. You, or your organisation, could also become a member of the growing Fair Finance Movement by joining Foundation East, or your local RFP. Doing so will enable your local economy to grow and help entrepreneurs in your region to make their dream a reality in 2017.

 

  • About the Author
    Katy Ford

    Katy Ford

    Working for Foundation East since its inception in 2004, Katy became Chief Executive in 2009. She had previously held the position of Treasury Manager for a large insurance company. In this role, she was responsible for developing and maintaining relationships with banks and investment houses on behalf of corporate clients, as well as the treasury team. Before this Katy ran a small hotel, an experience that enables her to understand the challenges faced by Foundation East’s SME clients.