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Sidestep the banks who have turned their backs on SMEs

Charlie Risley, Strategic Business Development Manager at Graydon UK, shows SMEs with frustrated growth potential how to thrive despite today’s market uncertainties.

For almost ten years, banks in particular have been reluctant to give business loans to SMEs, even those with great ideas, solid management and good prospects. And even if they do show interest, they present time-consuming and costly hurdles which work against the companies' natural tendency to move quickly to take advantage of new opportunities. The banks’ aversion to risk is an interesting contrast to the small entrepreneurs’ appetite for it.

Here's an example: Tangle Teezer, the designer and distributor of detangling hair brushes and associated products, turned over more than £28 million in the year to March 2016 – a somewhat different story to when its founder, Shaun Pulfrey, was rejected by the Dragons’ Den business wizards in 2007. Their comments, such as “hair-brained” and "a horse brush" must ring rather hollow today.

He raised initial finance from remortgaging his home and, the year after his televised rejection, secured a deal to supply Boots. The products now sell in over 100 countries.

Not everyone is able to remortgage their home or secure Dragons' Den publicity. Nor do they have a visible fan base, which, in Tangle Teezer’s case, includes Victoria Beckham and Cara Delevigne.  

However, if you are an SME with a decent idea and are hungry for growth, you can still secure the serious finance you need. Don’t be like many companies that are 'sitting out' the current turbulent times in the hope that circumstances improve – whatever happens, you could lose ground.

We're not talking here about help with day-to-day cash flow – this is readily available from a number of sources, including business cash advances which are paid back through credit card receipts, or invoice factoring and suchlike. We're talking about the tens or hundreds of thousands needed to take your business to the next level.

Crowdfunding is one option, especially if your product or service is easily understood and catches the imagination of potential funders. Social media is great for spreading the word and attracting would-be lenders. In one version, you promise interest payments, while in the other you offer equity. Some companies offer early versions of their product as an incentive to get involved and, no doubt, help to spread the word.

A company like Funding Circle exists to marry lenders and SMEs. Since 2010, it has facilitated loans worth £3 billion through 69,000 investors - individuals, local and national governments, and financial institutions.

Alternatively, you might use one of the more enlightened conventional lenders who take a closer interest in your business rather than rely on a "computer says 'no' approach" used by many – banks especially. They might offer you up to £500,000 and, even if you ended up paying back double the loan, if it gives you that growth you are dreaming of, it would be a small price to pay. Loans can be secured or unsecured, although the latter would probably require personal guarantees from company directors.

Many SMEs (publicans, for example) turn to Boost Capital for their unsecured finance – from £3,000 to £500,000. It gives answers within 48 hours. It can be tolerant of a bad credit history and the funds can be used for any legitimate business expense.

Credit4 provides guarantee-backed funding facilities of between £15,000 and £100,000 for growing SMEs. Loans to sole traders and partnerships start at £25,000. The larger loans are to SMEs that have been trading for at least 12 months.

You can seek a Merchant Money loan online and get a response within 24 hours. They offer a broad range of products which they can tailor to your business' needs: unsecured business loans up to £150,000, business cash advances from £3,500 and secured business loans up to £500,000.

These are just a few companies you might turn to when the banks won't help. When choosing a lender, your peers are a good source of advice. You might meet with them through a credit circle, a forum, at an institute (IoD maybe) or at association events – a show like the National Association of Credit and Finance Brokers (NACFB) Expo at the NEC each June. That would give you access to both sources of credit and people in a similar position as yours. Finally, if you work with a credit reference agency, it might also be able to point you in the right direction.

If you have the potential to grow but feel constrained by the inability to raise your business' finance, don't do nothing! There are solutions that could put you well ahead of the game while your competitors dither.


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