A SPOTLIGHT ON ALTERNATIVE FINANCE
Frustrated business owners are finding new ways to finance their business aspirations through the growing world of Alternative Finance .
22 | ONSIDE WINTER 2016
Ben Smart had been knocking on high street banks and private equity firms ’ doors for months and getting nowhere .
Ben was a qualified solicitor , providing commercial contract advice to , amongst others , waste management and recycling companies . However , he had ambitions to own his own business and researched companies in this field of activity , with good growth prospects and the potential for a management buy-in ( MBI ). He soon identified a 14-year-old business , Whitham Mills Engineering , which had been primed for a retirement sale , and made the bold move to ditch his lucrative legal career , complete an MBA and move into industry .
“ Even after all these years , the majority of UK SMEs turn to their bank before anyone else . ”
The Todmorden-based company provided a range of well-known , efficient and reliable bailing systems used in the recycling industry . It had created a niche market , in high quality bailing modules and low cost linkage manufacturing . However , its sales were limited to segments with few multi-site clients and less emphasis on repeat business . In addition , the company had not pursued contracts with recurring revenues , tendering for public contracts , or working with intermediaries .
Ben completed his business plan and set about sourcing the third party funds he required to support a Buy In Management Buy Out ( BIMBO ) of the company . After 12-months ' effort Ben ’ s bold move into the world of industry looked doomed . He was being turned away by banks and also private equity funders .
Following on from the 2008 banking crisis , a lack of a funding solution is an all-too common challenge to UK SMEs , from start-up funding through to development and expansion capital .
Simon Thorn , Corporate Finance Director of Acceleris Capital , has led many transactions that fall under the definition of Alternative Finance : “ Even after all these years , the majority of UK SMEs turn to their bank before anyone else . Banks will match what a business or its investors put in , but if a business has nothing , this doesn ’ t help . Without cash , small businesses simply aren ’ t able to grow .”
The ongoing problem of banks being less willing to lend to SMEs , has caused cash flow problems , prevented project development , and stunted growth . In response , businesses have been willing to explore more unconventional sources of funding , in the form of Alternative Finance .