I’m sure we can all remember some of the nice high street bank strap lines like Say `Goodbye’ to unhelpful banking, `Now there’s a thought’, what about ` the worlds local bank or moments that matter, I’m sure you can name the bank who called themselves `the worlds listening bank’. Unfortunately for small and medium sized businesses, banks being listening banks; enjoying moments that matter; saying goodbye to unhelpful banking are far from the reality, according to the British Business Bank, approximately 100,000 small and medium sized banks finance applications are declined each year. Startling as it sounds, some business groups put the figure nearer to 250,000.
Now SMEs and entrepreneurs are using alternative business funding solutions. The days when banks were the main source of business finance are long gone. Alternative funding sources are on the rise and are available, but unfortunately, many businesses are oblivious to what is available to them and how to access the funds. Small businesses continue to face barriers with high street banks during economic downturn as banks turn off the money supply to small business owners.
In August 2014, the former Chancellor George Osborne announced plans to introduce a bank referral system matching SMEs who were rejected for bank lending, with alternative lending. This would start a revolution with business owners who may not have squeaky clean credit scores, SMEs who are unable to get a high street bank overdraft or who have reached the maximum amount on their overdraft.
For any small business owner or entrepreneur, knowing what options there are available is key to growing your business, and is crucial to the financing options. The idea that an exact route can be mapped out for a business is one road analogy too far. Running a business will throw up many new challenges: closed roads or roads that lead to dead ends, so being aware of the alternative routes is critical. You may need to take advice on directions but if you are forearmed with the knowledge that there are alternatives, the journey is far less daunting. Availability will, of course, depend on the circumstances of a business. In our next blog we will discuss what financing options are available to SMEs and entrepreneurs.