ONSIDE / GUEST COMMENT
FINANCIAL FOCUS
As Chief Executive of the Forum of Private Business, Phil Orford hears first hand the difficulties
businesses can have sourcing finance. In this guest comment piece for ONSIDE he explains some
alternatives to bank finance, why working with businesses like Seneca is an important opportunity
in the current climate and looks at key emerging trends in the business lending landscape.
● A low appetite for finance
● The explosion of peer-to-peer financing
A number of studies have unearthed the fact that a
surprisingly high number of businesses are simply not
looking for finance. According to the quarterly SME Finance
Monitor, four in ten businesses meet the definition of a
‘permanent non-borrower’, and in the first half of 2014,
eight in ten were happy non-seekers of finance.
The peer-to-peer finance market grew up in a period of
economic uncertainty and although there remains an
awareness gap amongst small businesses, usage is rapidly
growing. Forum of Private Business research found that
18% of members would consider using an alternative lender
to replace their current banking services, whilst a larger
proportion (27%) would consider alternative providers to
supplement their existing finance provision.
It is therefore not surprising that, despite encouraging indicators
from our members – such as an increase in the number
reporting profits, increasing credit balances and an improving
external risk profile, the positivity is not being translated into
increased use of, or appetite for, external finance.
● A broader use of financial products
Part of the story behind declining net lending figures to
businesses is the wider use of alternatives. More businesses
are using asset finance, leasing vehicles or buildings, whilst
others are improving cash flow through invoice finance. The
growing use of supply chain finance schemes has helped,
though not when companies have used them to extend their
payment terms to suppliers. Our members are now using a
greater mix of financial products, recognising that different
types of funding can help in different parts of the business.
Phil Orford is the Chief Executive of the
Forum for Private Business, a national
business organisation but based in
Cheshire. www.fpb.org.uk
● The inexorable move online
Over 8,000 bank branches (46%) have closed across the UK
since 1990, and a further one in four branches will disappear
by 2019. Whilst our businesses appreciate face-to-face advice
and support and identify branch losses as the cause of a lack
of local decision-making, it is hard to see any new banks
investing heavily in a new network of branches.
Whether this process is irrevocable is debatable but right
now businesses continue to feel the technological push is
not replicating the closeness of relationship they would like.
Having access to a branch network is also traditionally seen
as a huge factor in whether new banks can enter the market.
As the network declines, so does competition.
At the Forum of Private Business we’ll continue to inform
our members of the evolving lending landscape including
the excellent work of innovative businesses like Seneca, and
we’ll continue to lobby finance providers and government
to do more to bridge the cash flow and liquidity gap as
growth opportunities improve.
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