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MARKET 04/2016
Alternative
business finance
market overview
Agenda
Strong economy, but uncertainty ahead
The general state of business lending
Alternative funding options for firms
In many ways, UK economy in fine shape
2008
credit
crunch
Today
UK employment, millions
Sources: ONS, Gov.uk, Telegraph
“The UK has its highest
ever employment rate
of 74%”
“Britain is now forecast
to be the fastest-growing
country in the G7”
But huge uncertainty ahead
“Bellwether for the
global economy
has crashed to its
lowest level ever”
“Ships are being
scrapped at
double the 1986
record rate”
Deja Vu? Across the pond Closer to home
Bank lending to firms collapsed over the
last few years; it’s now finally stabilising
fall in lending
to UK firms
£10 billion
Sadly for the economy, many faster-
growing sectors are the worst hit
Traditional sectors High-growth sectorsAssets
The hidden story is that overdrafts
are still collapsing; this won’t change
“A report from Funding Options, the
online business finance supermarket,
has said the overdraft cull shows no
signs of abating”
“Twice as many SMEs in the North of
England have had their overdraft
facilities axed.. says business financial
comparison site Funding Options”
This is a huge issue, because working
capital drives most SME finance needs
The business need
Source: BIS
“Giving a small
business an overdraft
is like handing a
child a loaded gun”
said a leading
business banker”
The bank view(!)
So why don’t firms just go elsewhere?
usage levels of
alternative finance
10%~20%
30%~40%firms using personal
credit cards
Dozens of finance
products, hundreds
of finance providers
“56% of SMEs unfamiliar with any
forms of alternative finance”
Sources: Cambridge University, AXA, FT
Alternatives to overdrafts
• Good if
you can
get
them
• Unattra
ctive for
banks
Invoice finance
• Factoring or discounting
• Unregulated market
Non-bank overdrafts
• New types of overdrafts
• Proactive monitoring
Business credit cards
• Tough qualifying criteria
• Limited scale of funds
Invoice finance a staple
for many B2B sectors;
key considerations are
cost versus flexibility
Emergency or top-up funding
Short-term loans
• Terms of a few months
• Up to a month’s revenue
Sell an invoice
• Single large invoices
• Even purchase orders
Dozens of short-term
lenders, with diverse
criteria; challenge is
knowing where to look
Revenue advances
• Pay as a % of revenue
• Fixed cost of finance
Longer-term growth facilities
Term loans
• Typically 2-4 year terms
• Traditional underwriting
Structured bank loans
• Drawdown on milestones
• Focused on growth firms
Biggest challenge for
many firms is they lack
physical security, in
often cyclical sectors.
Structured direct loans
• Bespoke & low volume
• Warrants popular
Thinking outside the box to get growth
finance: some recent case studies
Replaced bank with
flexible invoice finance.
Unlocked personal
pension for growth.
Executive search,
doubling turnover
Replaced bank with
flexible invoice finance.
Fast short-term loan
over Christmas.
Midlands regional,
£2m-£3m turnover
Nationwide £5m+
high-growth turnover
Kept existing bank
invoice finance.
Took unsecured
~£200k term loan.
Need finance? Have a go: fundingoptions.com
“Professional,
straightforward, fast, friendly”
“Helpful, speedy
and respectful”
Thanks & questions
CUSTOMERSEXPERTS
“Helpful,
speedy and
respectful”
“Help SMEs to
get the finance
they need”
PRESS
“The online
business finance
supermarket”
GOVERNMENT
“Hundreds of jobs
either saved or
created”
@FundingOptionsFundingOptions.com