Last month, George Osborne announced closer working ties with the European Investment Fund (EIF) and European Investment Bank (EIB) as part of the government’s plans to promote growth and create jobs in the UK...
The announcement was met with mixed views from the intermediary community with some believing the focus should be closer to home help and others welcoming any form of investment in the economy – and particularly small businesses.
Russell Gould, COO of Everline.
I share both viewpoints. Anything that makes funding more readily available to SMEs has to be good for businesses, job creation and the UK economy as a whole. Financial investment, as long as it comes from a legitimate source, is crucial to ensuring lenders like us are able to continue to help the country’s currently under-served small businesses which account for 99.3% of all private sector business in the UK.
Both the EIB and EIF already have a track record of supporting the British small business community. In 2014 they lent a record €7bn and more recently 25,000 UK SMEs have received financial help from the EIF.
I also know first-hand how effective investment from the EIF can be. Earlier this year, we signed the UK's first loan agreement with the EIF under the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME). Having already provided over 7,000 business loans and lent over £80m, this agreement has enabled us to open up a new portfolio of loans which will ultimately help an additional 3,000 UK SMEs achieve their growth plans over the next two years. This can only be seen as positive for business growth.
Improving the domestic lending landscape
While leaning on our European neighbours for support should be encouraged, I agree that more does still need to be done to improve the domestic lending landscape for small businesses. But I think it’s all of our responsibilities. Traditional lenders continue to be the default choice for small businesses despite relying on outdated and time-consuming techniques to make lending decisions, which often result in a business being declined or, at the very least, left waiting for weeks or even months to hear back on whether their application has been successful. The lucky few that are approved for a bank loan are often required to transfer all their banking as a condition of taking a loan – an added hassle and complexity to an already lengthy process.
As a small business ourselves, we know that time, skills and money are the three most common barriers to growth. A business is only able to grow when it has access to the right resources. In a recent independent survey we conducted, 42% of small business decision makers said a lack of working capital was detrimental to business growth. A quarter (26%) agreed their growth had been restricted due to lack of access to cash from traditional lenders or an unwillingness to lend.
In its pre-budget submission, a study by the Federation of Small Businesses (FSB) found that 28% of small businesses wanted the government to focus on the issue of access to finance. As a result, the FSB has requested an increase of competition in the UK business banking market and improved credit data sharing, which will allow e-lenders such as Everline - who rely on real-time data to make fast and fair lending decisions - to open up funding to more and more good small businesses.
Although alternative finance is growing by the day, it is still a fairly new market with new ways of approaching lending that probably seem hard to believe for those used to dealing with bank managers, meetings and lots of form filling. The fact that emerging lenders such as ourselves are able to make lending decisions within minutes by linking directly to a business’ relevant tax, bank and sales data is a bit of a leap.
With the government’s proposed plans to force banks to refer small businesses turned down for funding to alternative lenders still looking a while off – a shortlist of providers for the “neutral finance platform” was only announced last week: financial institutions, industry bodies and the government all have a role to play in ensuring businesses know the options available to them and how they can help their working capital needs.
Ultimately, awareness is the best all-round solution to ensuring that small businesses receive the right funding to achieve their growth plans and help the UK economy achieve its plans too. And if investment is offered along the way - home or away - then that can only be a positive for the SMEs in need of it most.
Attributed to Russell Gould, COO of Everline.
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