How valuable are brokers to SMEs?

Brokers need to remain close to commercial clients in a time of economic uncertainty - and support those who are seeking to embrace opportunities, according to Allica Bank’s Niv Subramanian.

Subramanian (pictured) is chief lending officer with the fintech lender, which aims to serve and support small and medium businesses, empowering them to succeed.

“We believe the role of brokers is extremely valuable in bringing choice to businesses,” Subramanian told Mortgage Introducer. “It is well documented that SMEs often just stick with their incumbent bank to borrow. If their bank is not able to help them with the right solution or the right experience, they often just refrain from taking those opportunities to invest in their business.

“Allica Bank is a bank built especially for established businesses in the UK. This is a critical segment of the UK economy, but often gets forgotten, being too small to warrant attention from the big banks, but often too large to use the services available through app-only fintechs.”

She continued: “Good brokers help customers expand their option pool and give their customers a much better chance of finding a financing solution that fits them best. This is especially useful for more established SMEs, where the needs can be quite complex.”

What, then, does Subramanian think brokers should do to maximise business over the next year? 

“Keep close to customers,” she advised. “Be there for those that are looking to take the opportunities during this uncertain period, and identify when customers that are in pause mode are ready to take their investment decisions again.”

She urged brokers to work with banks which are reliable and consistent in their approach to the market and are able to be flexible and nimble for their customers.

What’s happening with the UK’s economy?

“The good news is that the UK appears to have gotten over the inflation peak and interest rates appear to be stabilising,”  Subramanian observed, “contributing to more stable commercial property prices in many sectors. The UK economy seems to be avoiding recession for now, too. However, uncertainty is still a big challenge, both around these areas and with elections looming.”

This uncertainty has put off some businesses from making investment decisions, in Subramanian’s view.

“Those businesses that do take the right kind of risks when the rest of the market is quiet often emerge as the winners, and we are here to back them,” she said. “In the current climate, it’s vital that politicians do everything they can to create an environment that encourages businesses to invest and expand.”

Subramanian urged the government to reconsider proposed banking legislation that, she said, would make it harder for challenger banks to lend to SMEs. She pointed to research by Allica that suggests it could reduce the supply of SME lending by up to £44 bn.

She said the government should encourage banks to lend in ways which would otherwise sit outside their risk appetite and suggested this could boost so-called green finance.

“With more certainty post-election, and with businesses more comfortable making decisions, I like to think that investment and lending growth sees an increase 12 months from now,” Subramanian suggested. “If the regulatory environment remains sensible, then the current growth of SME lending away from just the big banks should continue, with a growing share of brokers advising businesses as part of this.

“After reductions in commercial valuations over the last 24 months, I think we should start seeing property prices going back up at least in some key segments, driving not just new demand but capital release demand as well.”

Read more:  Allica Bank reports growth with first full-year profit

How crucial is execution to success?

Subramanian, who has been in financial services for over 20 years – including working for household names such as Barclays and HSBC – has run her own businesses, which she believes gives her an  understanding of what it takes to build and run an SME. She believes the biggest business lesson she has learned has been how crucial execution is to success.

“I have found that in general, a simple or ordinary idea executed exceptionally well trumps a great idea executed badly,” she shared.  “I have myself moved from being in roles that were more thinking and strategy to actual delivery, whether a product launch or a budget, and have seen the impact I have been able to make grow significantly.”

She added: “I particularly enjoy working with SME businesses – where you can combine interacting with entrepreneurs and providing a personal service with the challenge of building cost-effective but tailored solutions that scale. With the technology and data capabilities now available, it is far easier to build great customer experiences and robust products within commercial lending.”