John Davies

An interview with John Davies: obtaining the 'necessary scale' is set to become 'increasingly difficult' for new alternative lenders

In an interview with Bridging & Commercial, John Davies, executive chairman at JLG Group (pictured above), discusses the difficulties for new entrants in the alternative finance market, the potential of providing SMEs with banking services and the prospect of European expansion.

What are the key qualities of alternative finance providers?

Number one has to be empathy with businesses looking to invest and grow. We have invested heavily in technology but, at the right time, businesses owners get to talk to highly experienced business bankers that show a genuine interest in their businesses and are often experienced in running businesses themselves.

Number two would be availability. The alternative lending sector was born out of the financial crisis in 2008 when, for various reasons, traditional banks dramatically reduced lending to SMEs. We now have a vibrant alternative lending sector that provides SMEs with plenty of options.

Do you expect there to be a surge in the number of alternative finance providers entering the market over the next five years?

I don’t think this will be the case. A range of alternative lenders have been able to obtain the necessary scale, but I think this will become increasingly difficult for any new entrants.

I also believe it will be difficult for the established traditional banks to move into this territory as they seem to be run by IT departments that have conflicting priorities and legacy systems to deal with — they often have more technology road maps than a Garmin!

In what way do alternative lenders — such as yourself — better serve SMEs?

SMEs need access to different forms of finance at different stages of their development and traditional banks and alternative lenders are meeting this challenge.

Alternative lenders realise that time-starved small business owners often need a swift answer and can’t wait weeks for decisions. We employ the technology that quickly allows us to tell the customer if they are likely to qualify and they then get to speak to experts who show genuine interest in their businesses and can offer the most appropriate finance facility.

We know we are getting this right because our regular quarterly customer surveys show we are ranked at virtually 100% for speed of service, team knowledge, product explanation and likelihood to recommend.

As a director, are there any particular financial markets you’d be hoping to focus on in the near future?

I think there is great potential to provide UK SMEs with banking services that they will value alongside flexible finance facilities.

Second, despite all the Brexit shenanigans, I think there is great potential to expand into mainland Europe — many countries simply don’t have an established alternative finance sector, compared to the UK, but they do have SMEs facing exactly the same challenges as they look to invest and grow.

How did you get into the industry?

Entrepreneurship has always been in my blood. I started my first business at 21 and by the age of 26, had sold it to Bowater PLC. The company then retained me as a divisional CEO, and it was during this time that I began to understand the importance of financial management.

I clearly remember being enrolled on a course for financial directors called ‘Cash Is King’ in my first few weeks at Bowater. I sat there, wet behind the ears, listening eagerly to the professor carrying out an incredible educational course that showed me the importance of cash for a business. If there’s no cash flow, it doesn’t matter how profitable you are, you will go out of business. It was a lesson I have never forgotten and the premise on which the group was founded.

If you didn’t work in finance, what would you be doing?

I would like to say indulging more in outside interests, such as skiing and rugby, but this wouldn’t be the case.

I have a passion for creating businesses that can achieve great things — both for customers and everyone working within them. 

That’s what you would find me doing.

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