"On Wednesday this week I will be joining a panel debate at the Shawbrook-sponsored NACFB Commercial Finance Expo, to discuss whether alternative lenders can ever fill the gap left by the high street banks.
Without pre-empting the conclusion of the debate my view will be yes, I believe they can.
By and large there has been reluctance on the part of the big banks to lend. This is a consequence of legacy issues with some impaired lending still on their balance sheets as well as increased regulatory demands on the amount of capital they must hold, but there is also a sense that they have become risk adverse in the extreme.
Onerous conditions and criteria, long, drawn out processes and unwelcoming offers mean many credit-worthy SMEs leave empty handed. Nothing suggests this situation is changing and figures released this month by the FSB suggest more than four in 10 small firms were refused credit by the top five banks in the second quarter of this year.
The recent announcement of the Government’s ‘funding for lending’ scheme again sparked debate around how we kick-start Britain’s economy and give our established, fledgling and new SMEs the support that they desperately need in order to grow.
Not just financial support but a show of assurance in their ability to succeed.
Reporting around the new scheme focused on the big banks, not the wave of exciting new entrants who have entered the commercial lending market in the past two years.
So perhaps it is time to turn the question on its head. Aren’t there already alternative, credible sources of funding out there for SMEs that are poised and ready to initiate a reform of the market? Isn’t it actually a question of raising their awareness and provoking a new confidence within the SME community that’s lacking?
This failure has had a stifling effect on parts of the business community and bred a cautious attitude. Some companies are now afraid to ask for funding, fearing that their current financial loans may be re-assessed or a knock back may have a negative impact on their credit rating in the future.
Many are also simply unaware that there is life, and more importantly credit, outside the big five banks.
At Shawbrook, funding to SMEs is one of our principal reasons for being and our commitment to supporting the market has been steadfast since we launched last year. As we’ve raised our profile we’ve seen more and more SMEs coming to us for funding. In fact it’s fair to say we’ve been inundated. The appetite out there is real. It’s just about un-tapping it and then giving the right level of financial and nurturing support required to grow.
We believe that expectation doesn’t have to fall at the door of the big banks – alternative sources of funding, from specialist banks like us to peer-to-peer networks or venture capitalists have an increasingly important role to play.
Whilst we see any effort to increase lending as a positive, by focusing in on the big banks we could, as a nation, be missing a trick. The key to turning this situation around is seeing the bigger picture.
There’s a wealth of funding from alternative lenders that’s just waiting to be accessed, and we believe there’s a movement of budding entrepreneurs and SMEs that just need a gentle push in the right direction."
Shawbrook Bank is sponsoring the NACFB Commercial Finance Expo on Wednesday 27th June.
