An acquaintance recently commented that the only way out of the current business malaise is if banks start to lend money to small businesses.
This comment seems to be very much in vogue. However, I know that it isn’t entirely accurate.
Small to medium sized businesses face not so much a lack of funding; there is plenty of money available to borrow. However they do have a lack of willingness to actually come forward and apply to borrow money.
Why? Over the last 4 years of deep recession, many businesses have faced challenging times and bear the scars to prove it. In particular they have found banks have been unsupportive of their situations, viewing them as a risk.
As a result businesses have ‘held out’ replacing older equipment. Furthermore they have ‘held out’ reviewing business finance facilities.
Today businesses are at last feeling that things may be improving. Yet they remain resistant to approach their lenders.
This is in part due to past negative experiences. It is also due to the constant press coverage surrounding banks taking unsympathetic views to new applications and business reviews.
In reality, business lending is taking a different direction. Most bankers will agree that the traditional bank overdraft is very much on the way out. The capital holding requirements imposed on banks and the need to have control over businesses means that bank overdrafts are no longer attractive business finance products.
However, businesses do have alternative options. I feel that these options have not been adequately communicated, as good news does not get the headlines. They seem to be a trade secret!
Where businesses should be looking is not so much to the main stream, but to the independent markets for alternative forms of business finance.
How should businesses access non-mainstream business financiers?
Who should businesses get advice from?
The answer is simple: their accountants. Not only are accountants seen as trusted advisors to businesses, but also they are generally believed to be able to provide guidance on all things financial.
A good accountant will know that every day new products are introduced into the business finance markets. A good accountant will work closely with a business finance broker to source the right business finance tool for its clients, whether it is seeking:
• Improved cash flow.
• Finance to purchase new equipment.
• Finance to expand a business.
• Cash flow to support seasonal trading problems.
Business finance brokers such as The Business Bureau work closely with most of the smaller independent finance companies. In addition they will have contacts with a number of high net worth individuals seeking suitable homes for their money.
Therefore business finance brokers are ideally positioned to source the most relevant and up to date financial tools to help a business. They are also able to connect businesses to lenders that are actually willing and able to work with new and developing companies.
So: to conclude. How to finance a business today? It is more than possible. I will reveal the secret. Know that the fault lies not with the banks that are perceived to be not lending, it’s the businesses not knowing what business finance tools are available to them.
Get in touch to find out the most appropriate business finance tools for your business.
Author: Simon Button Simon is a highly respected business finance broker who has worked in the commercial finance sector for over 25 years.
Get in touch for details about how to Finance a business.