THE EPIC BUSINESS LOAN BATTLE...loans anticipated, a 43% year-on-year increase.vi Businesses need cash. But, crucially, they need loans to be cost-eRective, account management to be

THE NETWORK FOR GLOBAL COMMERCE bankingcircle.com

SMEs fighting for finance

THE EPIC BUSINESS LOAN BATTLE:

A Saxo Group company

21134 Lending Whitepaper.qxp_Layout 1 23/05/2018 11:08 Page 1

CONTENTS

FOrEwOrd....................................................................................3

ExECUTIvE SUmmAry ................................................................4

THE BATTLEgrOUNd ..................................................................5

CHArTINg THE FIELd............................................................5

mOTIvATIONS FOr ENTErINg THE BATTLE ......................6

wAITINg IN NO mAN’S LANd................................................8

CAUSES OF CONFLICT ..........................................................9

BATTLEFIELd CASUALTIES ................................................11

THE BATTLE PLAN ..............................................................13

CONCLUSION: THE grANd STrATEgy ..................................16

THE rESEArCH BASE ..............................................................17

FULL SUrvEy rESULTS ..........................................................18

ABOUT SAxO PAymENTS BANkINg CIrCLE ..........................20

BANkINg CIrCLE LENdINg ................................................20

THE EPIC BUSINESS LOAN BATTLE

bankingcircle.comPAGE 2



bankingcircle.com PAGE 3

FOREWORdAccessing business finance is a battle which defeats large numbersof those SMEs willing to take up position on the front line. The SMEFinance Monitori recorded a dramatic shift in SME attitudes toborrowing, with just one in three willing to borrow money to growthe firm. However, the changing banking landscape has allowednew allies to step in, clearing enemy strongholds along the way andempowering businesses.

Businesses need cash. Small businesses need cash, big businesses need cash.Whether a short-term loan to cover the purchase of new equipment or a longer-term arrangement to help expand into new markets. Getting a start-up off theground requires a cash injection; growing an established business quickly requiresextra funds on top of normal cashflow; expanding even the largest company intonew territories or industries can rarely be done without some kind of businessfinance arrangement.

The problem is, post-recession, lenders are nervous. Businesses wishing to takeout a loan from a traditional bank must jump through hoop after hoop. And it cantake many months before they get their hands on the cash they need to take thebusiness forward.

Saxo Payments Banking Circle recently commissioned a study of small andmedium sized businesses in the online space, to uncover the pain points they haveexperienced in getting access to funding. In particular, the research sought toidentify where limitations of traditional bank-based business lending are impactingenterprise success, and how fresh players in the market are stepping up andjoining forces to support and empower businesses.

This latest Banking Circle white paper exposes the reality of obstacles small andmedium businesses face in obtaining finance from traditional lenders, and howpioneering innovative solutions are already beginning to change the entire businesslending landscape.

Anders la CourCo-founder and Chief Executive OfficerSaxo Payments Banking Circle



ExECUTIvE SUMMARyRespondents to our surveyrepresented a cross section of the UKSME market.

Over 500 individuals from across thespectrum of SME size and turnoverwere involved, giving a clear picture ofthe realities faced every day by youngand growing firms.

92.5% of respondents confirmed thatthey have had cause to accessbusiness finance within the past fiveyears. Of these, more than half (52%)needed to access finance to purchasenecessary equipment for thebusiness. 35% needed cash to helpthem buy inventory and 28% neededhelp with the cost of expanding intonew markets.

These are, of course, basic requirementsof any flourishing business.

A lack of access to funds could haveserious and even life-changingimplications. For 25%, it would meanhaving to let employees go. 30% wouldhave to reduce prices to encouragesales and increase cashflow, and 39%would be unable to buy the equipmentthe business needs.

In March 2018, The SME FinanceMonitor – the UK’s largest survey ofattitudes towards access to finance –revealed a worrying picture.ii Almost

half of the SME respondents describedthemselves as ‘permanent non-borrowers’, far higher than the one inthree who said the same in 2012.

In today’s fast-paced businesslandscape, there are very few smallfirms able to keep up or get ahead ofthe competition by relying only oncash the business generates. As ourrespondents demonstrated, almost allSMEs will, at some point, require extracash to continue or expand. Withoutaccessing extra funds, SMEs riskfalling behind, losing customers andpotentially joining the 90% of start-ups which do not make it beyondthree years of trading.iii

Unfortunately, since the crash of 2008,it has been difficult for businesses ofall sizes to access finance quickly. It isno longer a simple request, but abattle to get extra cash they need tosucceed or expand. This challenge isfelt most strongly by the small firmswhich have less flexibility intheir cashflow.

It was announced in a separate studyin March 2018 that over half ofbusinesses in the UK have beenunable to access the cash they needto allow them to grow. With SMEscontributing more than £200bn to theeconomy each year,v and making up99.9% of all UK businesses,vi

difficulties experienced within thisgroup could have a significant impacton the entire economy.

For many respondents, high fees andinterest rates are a major concern.Low interest rates would encourage58% to select a non-bank for a loan;for 44% it would take lowarrangement fees or flexible paymentoptions. A quarter would consider aspecialist lender who could offersimple online account management.

To succeed in the new digital era,financial institutions – banks andFinTechs alike – need to focus oncustomer relationships. However,legacy systems and regulation areslowing them down, meaning they donot have the ability to provide flexible,affordable business loans. NewFinTech entrants are able to offermerchants a cheaper, fasteralternative to the banks.

This is where the Financial Utility canstep in, providing FinTechs with thecapability to offer their merchantcustomers a transparent, flexible, low-cost, and easy-to-manage loansolution. Businesses are changing,and so are their banking needs.Financial institutions must keep up orrisk defeat.

AltFi data recently predictedsignificant growth in the lendingmarket in the UK – with £7.5bn of newloans anticipated, a 43% year-on-yearincrease.vii Businesses need cash. But,crucially, they need loans to be cost-effective, account management to besimple and accessible, and repaymentterms to fit around their business.

Businesses need a new generation ofinnovative, affordable, forward-thinkinglenders, able to move quickly withoutlegacy systems holding them back.

92.5% of SmEs haveaccessed businessfinance within thepast five years

Low interest rateswould encourage58% to select a non-bank for a loan


62.2%

84%

53.7%

13.2%

34.1%

43%

51.8%45.6%

2.8% 3.7% 3.4% 2.6%

The same one for all countries in which my business trades

1-9 employees

One for my UK banking and a seperate one for international transactions

A different one for each individual country in which my business trades

10-49 employees 50-99 employees 100-249 employees

Yes No I don’t know

81.1%

13.2%

5.7%

1-9 employees

76.3%

19.3%

4.4%

90.6%

8.7%

0.7%

10-49 employees

50-99 employees

87.7%

11.4%

100-249 employees

0.9%



THE BATTLEGROUNd Charting the field

To build an accurate picture of the payments market, respondents were asked aboutthe different bank accounts they currently hold for their local and internationaltransactions. More than half of respondents complete all transactions through oneaccount, although 35% have a separate account to handle cross border paymentsand 3.2% require separate accounts for each country within which the companytrades.

84% of the smallest SMEs just have one bank account, with just 13.2% havinganother account for international transactions. In contrast, almost half (45.6%) of thelargest SME respondents have a separate bank account for trading in foreignmarkets.

The higher the number of accounts a business holds, the more complicated thepayment process and accounting can become. And even businesses with just oneaccount should ensure they are not being over-charged and under-served by thataccount if they do use it for foreign exchange as well as local payments. Mosttraditional bank accounts incur high fees and slow transfer times across borders.

These issues can lead to fractious business banking relationships. Many of ourrespondents do not feel well-served by their current banking partners. Whilst 84% ofall respondents are satisfied, the SMEs with 10-49 employees are the least satisfied,at 76.3% with nearly 1 in 5 saying they do not feel they are well-served by theircurrent banking partner.

35% of SmEs have a separate accountto handle crossborder payments

SmEs with 10-49employees are theleast satisfied withtheir current bankingrelationships

what banking relationships does your business have?

do you feel your business is well-served by your current banking partners?



Of the various types of businessfinance available, respondents to thissurvey revealed that a long-termfinance agreement of between oneand three years, to fund a specificpurchase, was the most commonlyused. The largest SMEs were the mostlikely to have taken out such a loan,with 68.4% having done so in the pastfive years, compared to just 35.8% ofmicrobusinesses. Larger businesseswere also the most likely to havetaken out a long-term loan from aspecialist lender, rather than theirday-to-day bank – 29% have done so,compared with just 8.5% of thesmallest firms.

Almost half (47.2%) of themicrobusinesses, with up to nineemployees, have used an overdraftfacility, and two in three (60%) of thesmall SMEs with 10-49 employeeshave used their overdraft in the pastfive years.

Perhaps unsurprisingly,microbusinesses were the most likelyto have required finance as a short-term solution to cover business costs.Cashflow is slower in small and youngfirms just getting off the ground, and acash injection is often vital to successand often survival.

motivations for entering the battle

60% of SmEs with10-49 employeeshave used theiroverdraft in the pastfive years

68.4%

43%56.4%

35.8%

47.2%

26.4%37%

22.6%35.6%

40.9%30.7%

8.5%

8.5%

25.2%

17.8%15.4%

28.9%

21.7%6.7%

22.8%37.7%

38.9%35.1%

60%42.3%42.1%

2%2.6%

1-9 employees

10-49 employees

50-99 employees

100-249 employees

A finance agreement of between 1 and 3 years to fund a specific purchase,

such as vehicles, equipment, etc

Overdraft

A short-term loan from my main day-to-day bank

A long-term loan from my main day-to-day bank

A long-term loan from a bank other than my main day-to-day bank

Long-term financing from a specialist finance provider

My business has not accessed any business finance in the past 5 years

what sort of business finance have you accessed in the past 5 years




Larger SMEs, however, were the mostlikely to need additional funds to coverpayroll costs – a worrying picturewhen you consider potentialdifficulties and delays in obtaining thenecessary finance for payingemployee salaries. At the other end ofthe stability scale, the larger firmswere also the most likely to be lookingto expand their premises or move to alarger site.

Across all sizes of SMEs, the mostcommon reason for the company

taking out business finance was topurchase new equipment. This wasfollowed by purchasing inventory forall sizes except the largest SMEs,where the purchase of seasonal stocktook the second spot.

Whilst some reasons for needingbusiness finance are encouraging andreveal ambitious growth projections,some do highlight potential issues,especially when finance is harder toobtain quickly.

68.4% of SmEs with100-249 employeestook out a loan to funda specific purchase

49.4%

57.9%

51.4%47.7%

32.5%

10.8%

20.6%

21.9%

28.8% 28.8%

12%

15.9%

13.7%

28.8%

16.9%

9.5%

6.3%7.2%

7.9%

10.3%10.8%

8.9%9.6%

22.2%21.2%

35.7%35.6%

33.3%

19.3%

23.8%

32.2%31.5%

16.9%

22.2%25.3%

36%

16.9%

26.2%26.7%

29.7%

21.7% 23.3%21.4% 27.9%

1-9 employees 10-49 employees 50-99 employees 100-249 employees

To buy equipment To purchase inventory

To expand into new markets

To purchase seasonal stock

To refurbish existing premises

To invest in marketing / advertising

To move to new premises

To expand to additional premises

To increase head count for a

short-term need

As a short-term solution to cover business costs

As a short-term solution to cover

payroll

why did you need business finance?



A studyviii recently revealed that overhalf of UK businesses are unable toaccess necessary funding to helpthem grow the business. With SMEscontributing more than £200 billioneach year, and projections suggestingthis will grow by almost 20% by 2025,SMEs are a vital component of the UKand global economy. Any delay in theirprogress and growth could have asignificant economic impact.

In our study, which involved 504individuals, just two respondentsstated that they have previouslyarranged finance within one day.Overall, only 3% said it took less thana week to get the finance set up –including 8.4% of microbusinesses,but none of the largest SMEs.Generally, the larger the SME, thelonger it took to arrange finance.

This is positive news for the smallestof companies, but not by much. 51.8%of microbusinesses arranged financein one to two weeks, which can be along time in the life of a start-up. Formost of the larger SMEs, finance took3-4 weeks to set up.

Worryingly, for 2.1% of all SMEs, and3.6% of the 100-249 employee firms,finance took between five and sixmonths to arrange. A business and itsmarket can change significantly inthat time. A delay of this magnitudecould have a catastrophic impact on

the company, and even if it doessurvive it could lag a long way behindits competitors and may never makeup this lost ground.

When deciding where to apply forfinance, more than half of larger SMEsare reluctant to borrow from theirday-to-day bank because they can seeall of their finances. This is only anissue for 32.1% of the smallest firms.

waiting in no man’s land

Just tworespondents havepreviously arrangedfinance within one day

For 3.6% of largerSmEs, finance tookbetween five and sixmonths to arrange

8.4%

1.6% 3.4%

23.4%19.3%

34.9%

45.9%

37.8%

13.3%12.7%

26.1%

6%

1.2%1.6% 2.1% 3.6%7.1% 6.8%

9%

19.2%

51.8%

42.1%

22.6%


Less than a week 1-2 weeks 3-4 weeks 1-2 months 3-4 months 5-6 months

Typically, how long did it take to get the finance set up?


58.5%58.5%

52.3%56.1%

57%

9.4%12.6%

16.8%17.5%

8.5% 8.1%10.4%

5.9%3.4%

1.8%

6%

34%

40%

47%


I would go to a different bank

I would go to a specialist finance provider, such as an asset finance company or motor finance company

I would go to a credit insurance company

I don't know I wouldn't get finance

what would you do if you ever experienced problems obtaining finance from your usual bank?



Aside from this reluctance to providethe business’ day-to-day bank with thefull picture of the company finances,the problems experienced by mostSMEs looking to borrow from theirmain bank centre around cost.

35% of SMEs found that their usualbank wasn’t able to offer the bestinterest rate on their borrowing, and28% were put off by heavyarrangement fees. 23.4% found theirbank was unable to facilitate thefinance quickly enough, and 21.4%didn’t even get a fast-enough responsefrom the bank.

Speed and cost were the two biggestoverriding factors, but these affectedthe largest firms more than thesmallest SMEs. 38.6% of the largestSMEs, compared to 32.1% of themicrobusinesses, found their bankdidn’t offer the best rate, and 31.6% oflarge SMEs and 22.6% ofmicrobusinesses experienced heavyarrangement fees. Speed ofarrangement affected 30.7% of largeSMEs and 14.2% of the smallestcompanies.

Causes of conflict

Yes No

32.1%

67.9%

1-9 employees

55.6%

44.4%

51.7%48.3%10-49

employees50-99

employees 57%43% 100-249

employees

would you be reluctant to take out a loan from your main business bank because they can see all your finances?

35% of SmEs foundthat their usualbank wasn’t able tooffer the bestinterest rate ontheir borrowing



38.6%

32.6%

36.2%

32.1%

10.4%

7%

26.3%

31.6%

3.7%

27.5%

30.7%

20.8%

12.3%

23.7%

20%

28.1%

16.8%

14.9%

13.2%

16.3%

19.5%

6.7%

33%

14.2%

20%

22.6%

27.4%

29.5%


They didn't offer the best rate

They charged a heavy fee to arrange the finance

They couldn't facilitate the finance quickly enough

They didn't respond quickly enough

I have not experienced any problems when applying for finance from

my day-to-day bank

They didn't offer the length of the loan that I wanted

I have never applied for finance from my bank

what problems have you experienced when applying for finance from your day-to-day bank?

More than half (56.2%) of thebusinesses in this study would go to adifferent bank if they could not obtainfinance from their day-to-day bank.Interestingly, in the case of the largestSMEs, almost the same number wouldlook at going to a specialist financeprovider (57%) as would go to anotherbank (56.1%).

Worryingly, one in ten microbusinesseswould simply give up and not get thefinance they needed.

Taking out any type of finance for abusiness is a serious commitmentwhich must be considered carefully. Itcan of course raise many concerns forthe business. The biggest concernacross all respondents to this surveywas the long-term commitment of fixedrepayments (42.1%). However, thesmallest companies are most worriedabout being unable to afford thoserepayments, should they hit hardertimes (48.1%). Just 13.9% would haveno concerns at all.

57% of the largestSmEs would look atgoing to a specialistfinance provider ifthey couldn’t obtainfinance from theirusual bank




31.1%

48.1%

19.8%

22.6%

1-9 employees

10-49 employees

50-99 employees

100-249 employees

The long-term commitment of repayments at a fixed rate

The risk of not being able to afford the repayments if business took a down-turn for a period of time

The fact that the loan would show on company accounts

I would have no concerns about taking out finance for my business

44.4%

41.5%

37%

14.1% 10.1%

42.3%

38.3%

43%

10.5%

49.1%

36.8%

44.7%

what would be your concerns about taking out finance for your business?

For all the SMEs involved in this study,whether or not they have hadproblems borrowing from their bankin the past, almost half admitted theymight be prevented from borrowingfrom their usual bank by high interestrates (48%) or set-up fees (42.1%).Inflexible payment options would putoff a quarter (24.2%) of all SMEs, withthis being a bigger issue for largerSMEs, of whom 35.1% might beprevented from borrowing for thisreason.

Just over a quarter (27.2%) prefer tokeep their borrowing separate fromtheir day-to-day banking and wouldtherefore seek finance elsewhere. Thisis most likely in the larger firms –30.7% of companies with 100-249employees, compared to 20.8% of themicrobusinesses.

14% of all SMEs, and 21.1% of thelargest SMEs, would not borrow fromtheir usual bank due to a previous badexperience.

With cashflow so fundamental toexpansion and success, lack of accessto necessary finance solutions couldbe stunting the growth of SMEs,resulting in a negative impact on theeconomy as a whole.

In the event that they could not accessbusiness finance, a quarter of SMEs(24.6%) would have to let employeesgo, and 13% would fail. Lack of financecan have a devastating and life-changing impact on smallerbusinesses.

To increase cashflow without cashfrom an external lender, a third(29.8%) of SMEs would be forced toreduce prices in an attempt toincrease sales. The most commonimpact, for 39.1% of SMEs, is that theywould be unable to purchase newequipment, again stunting growth andpotentially leaving firms laggingbehind the competition if they areforced to make do with out-dated orinadequate equipment.

Battlefield casualties

High interest ratescould prevent 48%of SmEs fromborrowing fromtheir usual bank

SmEs with 10-49employees are theleast satisfied withtheir current bankingrelationships



50.9%

45.2%47%

50%

36.8%

20.8%25.9%

17.9%25.2%

19.5%35.1%

18.9%

12.3%

17.8%

13.3%10.1%

21.1%

8.7%

14.1%

19.8%

7.9%

18.8%21.1%

30.2%30.7%

36.3%45%

50%


High interest rates

High set-up fees

I prefer to keep my borrowing separate from my day-to-day banking

Inflexible repayment options

They wouldn't lend based on cashflow/credit history of the company

A bad previous experience

Nothing would prevent me from using my existing bank for a loan in future

what might prevent you from using your existing bank for a loan in future?





I couldn't acquire new equipment

I would have to reduce prices to increase sales

I would have to let employees go

I would have to move to smaller premises

I couldn't increase headcount There would be no impact of a lack of finance for my business

The business would fail

33%

40.7%

44.3%

36%

23.6%

25.9%

16%

20.8%

25.4%

28.3%

17%

5.4%

7.9%

10.4%

16.3%

11.4%

14.9%

21.5%

37.6%35.1%

22.6%24.4% 24.2%

27.2%

14.2%

23.7% 24.2%

32.5%

what would be the impact on your business if you were unable to gain access to finance?

Post-recession bank borrowing is farmore challenging. However, the newlandscape has also given rise to a newgeneration of lenders. Businesses areever more aware that traditional bankstoday are not necessarily the bestsolution for business finance. Not onlyare banks stricter in their lendingdecisions, but they do not usuallyprovide the best level of service.

As the Financial director of QuickCapital recently told Real Business,ix

“When a business is new and growingfast, opportunities arise and decisionsare made rapidly.” There is no time towait for a slow response from a bank,or to hang around in limbo while thebank goes through its legacy processesand takes weeks or even months toarrange the necessary finance.

Alternative providers offer a moretransparent and fair solution, able toprovide better rates, lower fees andmore flexible repayment options.

Knowing how vital finance can be for abusiness, two in three of ourrespondents confirmed that they wouldbe willing to sign a personal guaranteeagainst their property or other assets,so that they could obtain the financethe business needed. Larger, morestable SMEs were the most open to thisoption, with 77.2% of respondentsrepresenting firms of 100-249employees stating they would be willing to take this course of action. Thisis compared to 44.3% of those inmicrobusinesses.

The battle plan

A third of SmEshave already used a non-bank for abusiness loan


A third of the SMEs in our survey havealready used a non-bank, such as aspecialist finance company, for abusiness loan. Larger firms are themost likely to have done so, with 46.5%already having borrowed in this way,compared to 16% of businesses with upto nine employees.

Low interest rates proved the mostattractive feature of loans from non-banks, with 57.5% of respondentssaying this would encourage them toselect a non-bank in future. Stayingwith costs, low arrangement fees wouldencourage 43.5%, as would flexiblerepayment options.

However, it is not just the cost whichSMEs consider in their choice of lender.Fast responses and simple account

management would encourage aquarter of SMEs to approach analternative lender (25% and 25.2%,respectively). These are often elementson which a bank is unable to becompetitive in today’s market. Thelegacy systems and long processeswhich have been in place forgenerations mean that banks areunable to be as agile and flexible asnewer more innovative providers.

Between them, the biggest bankscontrol over 90% of the market, and thebank rejection rate for first-time start-up borrowers is around 50%.x Thebusiness landscape has changeddramatically in recent years, but thelending offering from banks has notkept up.


60.7%

44.3%

63.8%

33%

24.4%21.5%

77.2%

15.8%

22.6%

14.8% 14.8%

7%

Yes

1-9 employees

No I don’t know

10-49 employees 50-99 employees 100-249 employees

Yes No

16%

84%

1-9 employees

68.9%

31.1% 36.9%

63.1%10-49

employees50-99

employees46.5%53.5%

100-249 employees

If you needed to obtain business finance, would you be willing to sign a personal guarantee against your property/otherassets in order to obtain it?

Have you ever used a non-bank (such as a specialist finance company) to get a loan?

Low arrangement fees would encourage43.5% of SmEs toselect a non-bank in future




59.6%

65.2%51%

54.7%

42.5%

34.9%48.9%

26.4%28.1%

22.1%24.6%

21.7%

14.2%

25.2%

20.7%24.2%

27.2%

21.7%8.9%

5.4%

24.8%28.1%

42.3%46.5%

53.3%38.9%38.6%

3.8%3%

5.4%3.5%

1.8%


Low interest rates

Low arrangement fees

Flexible payment options (e.g. ability to pay more during more profitable times,

and less at more challenging times)

Simple online account management

If they responded quicker than my bank

The ability to keep borrowing and day-to-day banking separate

Nothing would encourage me to select an alternative lender in the future

I wouldn't use an alternative lender

what would encourage you to select a non-bank – such as a specialist - in future?



CONCLUSION: THE GRANd STRATEGyPrevious solutions do not meet the needs of SMEs. Traditional providers do notalways understand the sector and business needs of SMEs, and if they dounderstand, they are often unable to adapt and offer the flexible solutions SMEsneed. In the past, as daniel Meere, Managing director of Axis Corporate,explained to Finextra,xi banks previously attempted to develop and delivermodels internally, but this has become increasingly difficult as competition hasgrown and turnaround times needed to be cut.

In response, banks are now more open to partnerships. They are bringing inthird-party allies to deploy tailored solutions on their behalf, in an ecosystemmodel. They are joining the crusade to bring fair, affordable solutions toconsumer and business customers.

The current market offers exciting opportunities for smaller businesses. Butfinancing change and growth through traditional means is increasingly difficult.It is therefore extremely encouraging to see alternative solutions coming ontothe battlefield, to help businesses achieve their ambitions.

Banks and FinTechs can help their business customers by working with a third-party which is better able to provide a flexible, affordable lending solution. Andwithout the significant investment which would be required if the bank orFinancial Tech business were to build the solution in-house.

The financial industry has reached a ‘Utility Moment’. The days of each providerbuilding and delivering every element of a customer’s financial life are fadingfast. These providers, particularly the long-established banks, simply cannotinvest heavily enough in innovation and digitisation whilst also providing the highlevel of customer service required to remain competitive alongside new entrantsto the market.

Prosperous financial institutions will be the ones embracing the ecosystemmodel, joining forces with expert allies – third-party providers. They alone will beable to offer customers the best range of solutions possible, reinforced byexcellent customer service, transparency, flexibility and low costs.

For SMEs in particular, accessing business finance can feel like going over thetop, into no man’s land and taking on an unseen enemy. Alone, prospects are notgood. But alongside an army of providers able to offer tailored, flexible,transparent solutions, built specifically to meet current business needs, thebattle can be won and businesses can access the cash they need to grow,expand and prosper.


21.03%

26.79%

29.56%

22.62%

1-9 employees 10-49 employees

50-99 employees 100-249 employees

East of England7.14%

East Midlands4.76%

West Midlands4.96%

Yorkshire and the Humber 9.72%

North East1.98%

Scotland5.75%

South East14.09%

London26.19%

South West6.15%

Wales6.55%

North West9.92%

Northern Ireland2.78%

Financial Decision Makers

Directors or Higher

49.8%50.2%

Under £100,000

£100,000 - £999,999

£1 Million - £9.99 Million




£500 Million or over

I do not know

Prefer not to say

7.54%

5.95%

2.38%

2.38%

0.4%

24.6%

28.17%

10.52%

18.06%



THE RESEARCH BASEThe research was conducted by Censuswide in March 2018, with 504 respondents from SMEs that have an online presencein the UK.xii

Respondents represented all regions of the UK, and SMEs of all sizes, from microbusinesses comprising 1-9 employees upto larger SMEs with between 100 and 249 employees.

Most of the businesses involved in the research have a turnover of £1 million - £9.99 million, but all levels of turnover wererepresented, including under £100,000 and over £500 million.

The sample was evenly split between Financial decision Makers, and directors and above.

region

Company Turnover

Company Size

Job role



FULL SURvEy RESULTSQ1: What Banking relationships does your business have?

TOTAL 1 - 9 employees 10 - 49 employees 50 - 99 employees 100 - 249 employees

The same one for all countries in which my business trades 61.90% 84.00% 62.20% 53.70% 51.80%

One for my UK banking and a separate one for international transactions 34.90% 13.20% 34.10% 43.00% 45.60%

A different one for each individual country in which my business trades 3.20% 2.80% 3.70% 3.40% 2.60%

Q2: do you feel your business is well-served by your current banking partners?


yes 84.10% 81.10% 76.30% 90.60% 87.70%

No 13.10% 13.20% 19.30% 8.70% 11.40%

I don't know 2.80% 5.70% 4.40% 0.70% 0.90%

Q5: Typically, how long did it take to get the finance set up?


Less than a week 3.00% 8.40% 1.60% 3.40% -

1-2 weeks 33.30% 51.80% 42.10% 22.60% 23.40%

3-4 weeks 36.30% 19.30% 34.90% 45.90% 37.80%

1-2 months 18.00% 13.30% 12.70% 19.20% 26.10%

3-4 months 7.30% 6.00% 7.10% 6.80% 9.00%

5-6 months 2.10% 1.20% 1.60% 2.10% 3.60%

Q6: What might prevent you from using your existing bank for a loan in future? (Tick all that apply)


High interest rates 48.00% 50.00% 45.20% 47.00% 50.90%

High set-up fees 42.10% 36.80% 36.30% 45.00% 50.00%

I prefer to keep my borrowing separate from my day-to-day banking 27.20% 20.80% 25.90% 30.20% 30.70%

Inflexible repayment options 24.20% 17.90% 25.20% 19.50% 35.10%

They wouldn't lend based on cashflow/credit history of the company 19.00% 18.90% 17.80% 18.80% 21.10%

A bad previous experience 13.90% 12.30% 13.30% 10.10% 21.10%

Nothing would prevent me from using my existing bank for a loan in future 12.30% 19.80% 14.10% 8.70% 7.90%

Other (please specify) 0.20% 0.90% - - -

Q3: What sort of business finance have you accessed in the past 5 years? (Tick all that apply)


A finance agreement of between 1 and 3 years to fund a specific purchase,such as vehicles, equipment, etc

51.20% 35.80% 43.00% 56.40% 68.40%

Overdraft 48.00% 47.20% 60.00% 42.30% 42.10%

A short-term loan from my main day-to-day bank 34.90% 26.40% 37.00% 38.90% 35.10%

A long-term loan from my main day-to-day bank 33.30% 22.60% 35.60% 40.90% 30.70%

A long-term loan from a bank other than my main day-to-day bank 23.80% 8.50% 25.20% 22.80% 37.70%

Long-term financing from a specialist finance provider 17.70% 8.50% 17.80% 15.40% 28.90%

My business has not accessed any business finance in the past 5 years 7.50% 21.70% 6.70% 2.00% 2.60%


Q4: Why did you need business finance? (Tick all that apply)


To buy equipment 51.90% 49.40% 57.90% 51.40% 47.70%

To purchase inventory 34.50% 32.50% 35.70% 35.60% 33.30%

To expand into new markets 27.50% 19.30% 23.80% 32.20% 31.50%

To purchase seasonal stock 25.50% 16.90% 22.20% 25.30% 36.00%

To refurbish existing premises 25.50% 16.90% 26.20% 26.70% 29.70%

To invest in marketing / advertising 23.60% 21.70% 21.40% 23.30% 27.90%

To move to new premises 21.20% 10.80% 20.60% 21.90% 28.80%

To expand to additional premises 21.20% 9.60% 22.20% 21.20% 28.80%

To increase head count for a short-term need 17.60% 12.00% 15.90% 13.70% 28.80%

As a short-term solution to cover business costs 9.90% 16.90% 9.50% 8.90% 6.30%

As a short-term solution to cover payroll 9.20% 7.20% 7.90% 10.30% 10.80%

Other (please specify) 0.60% 2.40% - 0.70% -




Q7: If you needed to obtain business finance, would you be willing to sign a personal guarantee againstyour property/other assets in order to obtain it?

TOTAL 1 - 9 employees 10 - 49 employees50 - 99

employees100 - 249

employees

yes 61.90% 44.30% 60.70% 63.80% 77.20%

No 23.40% 33.00% 24.40% 21.50% 15.80%

I don't know 14.70% 22.60% 14.80% 14.80% 7.00%

Q8: Would you be reluctant to take out a loan from your main business bank because they can see allyour finances?

TOTAL 1 - 9 employees10 - 49

employees50 - 99

employees100 - 249

employees

yes 46.80% 32.10% 44.40% 51.70% 57.00%

No 53.20% 67.90% 55.60% 48.30% 43.00%

Q9: What would be the impact on your business if you were unable to gain access to finance? (Tick all that apply)


I couldn't acquire new equipment 39.10% 33.00% 40.70% 44.30% 36.00%

I would have to reduce prices to increase sales 29.80% 23.60% 21.50% 37.60% 35.10%

I would have to let employees go 24.60% 22.60% 24.40% 24.20% 27.20%

I would have to move to smaller premises 23.80% 14.20% 23.70% 24.20% 32.50%

I couldn't increase headcount 22.20% 16.00% 25.90% 20.80% 25.40%

There would be no impact of a lack of finance for my business 13.90% 28.30% 17.00% 5.40% 7.90%

The business would fail 13.30% 10.40% 16.30% 11.40% 14.90%

Other, please specify 0.80% 3.80% - - -

Q10: What problems have you experienced when applying for finance from your day-to-day bank? (Tick all that apply)


They didn't offer the best rate 34.90% 32.10% 32.60% 36.20% 38.60%

They charged a heavy fee to arrange the finance 28.00% 22.60% 27.40% 29.50% 31.60%

They couldn't facilitate the finance quickly enough 23.40% 14.20% 20.00% 27.50% 30.70%

They didn't respond quickly enough 21.40% 12.30% 23.70% 20.80% 28.10%

I have not experienced any problems when applying for finance from myday-to-day work

20.60% 33.00% 20.00% 16.80% 14.90%

They didn't offer the length of the loan that I wanted 18.80% 13.20% 16.30% 19.50% 26.30%

I have never applied for finance from my bank 6.70% 10.40% 3.70% 6.70% 7.00%

Q14 - What would encourage you to select a non-bank - such as a specialist - in future


Low interest rates 57.50% 54.70% 65.20% 51.00% 59.60%

Low arrangement fees 43.50% 42.50% 53.30% 38.90% 38.60%

Flexible payment options (e.g. ability to pay more during more profitabletimes, and less at more challenging times)

43.50% 34.90% 48.90% 42.30% 46.50%

Simple online account management 25.20% 26.40% 28.10% 22.10% 24.60%

If they responded quicker than my bank 25.00% 21.70% 25.20% 24.80% 28.10%

The ability to keep borrowing and day-to-day banking separate 21.80% 14.20% 20.70% 24.20% 27.20%

Nothing would encourage my to select an alternative lender in the future 8.90% 21.70% 8.90% 5.40% 1.80%

I wouldn't use an alternative lender 4.00% 3.80% 3.00% 5.40% 3.50%

Q11: What would you do if you ever experienced problems obtaining finance from your usual bank? (Tick all that apply)


I would go to a different bank 56.20% 58.50% 58.50% 52.30% 56.10%

I would go to a specialist finance provider, such as an asset financecompany or motor finance company

44.60% 34.00% 40.00% 47.00% 57.00%

I would go to a credit insurance company 14.30% 9.40% 12.60% 16.80% 17.50%

I don't know 5.80% 8.50% 8.10% 6.00% -

I wouldn't get finance 5.20% 10.40% 5.90% 3.40% 1.80%


Q12: What would be your concerns about taking out finance for your business? (Tick all that apply)


The long-term commitment of repayments at a fixed rate 42.10% 31.10% 44.40% 42.30% 49.10%

The risk of not being able to afford the repayments if business took a down-turn for a period of time

40.90% 48.10% 41.50% 38.30% 36.80%

The fact that the loan would show on company accounts 36.90% 19.80% 37.00% 43.00% 44.70%

I would have no concerns about taking out finance for my business 13.90% 22.60% 14.10% 10.10% 10.50%

Q13: Have you ever used a non-bank (such as a specialist finance company) to get a loan?


yes 33.10% 16.00% 31.10% 36.90% 46.50%

No 66.90% 84.00% 68.90% 63.10% 53.50%


THE NETWORK FOR GLOBAL COMMERCE bankingcircle.com

ABOUT SAxO PAyMENTS BANKING CIRCLE Saxo Payments Banking Circle is a global scale financial utility that gives financialinstitutions the ability to enhance their customer proposition.

By leading the rise of a super-correspondent banking network, Banking Circle is helpingFinTechs and banks to provide their customers with faster and cheaper cross borderbanking solutions, without the need to build their own infrastructure and correspondentbanking partner network. As such, Banking Circle is empowering these financialinstitutions to support their customers’ international trading ambitions, without theneed for multiple banking relationships, whilst reducing risk and the operational cost oftransactions. And that is enabling them to remain competitive.

The world of banking and payments is at a turning point. And the winners in thischanging world will be those organisations that recognise the importance of playing totheir own strengths; building alliances with strong partners who complement their owncustomer proposition.

Financial Tech businesses and banks can add real value to customer relationships withBanking Circle Lending. going to the heart of one of the perennial business challenges –that of managing cash flow - Banking Circle Lending enables FinTechs and banks to offertheir merchants fast access to cash, without any credit exposure to their business.

Banking Circle Lending provides an extra revenue stream for Financial Tech firms, andbanks that are eager to digitise, providing them with the facility to offer loans to theirmerchant customers. whether a company needs to purchase seasonal stock, refurbishpremises, invest in marketing or increase head count, a quick and simple loan could makethe difference. But existing business lending models are slow, expensive and inefficient.

rather than the average 60 days it takes a traditional bank to extend a new loan, the entireapplication process takes up to 72 hours with Banking Circle Lending. FinTechs can givemerchants faster access to cash, with flexible repayment options and personalised onlineaccount management and banks can do the same and keep up with the competition in thedigital space.

merchants will receive an indicative offer within minutes via an online calculator. A bindingoffer is made within 24 hours after an Id verification and credit review process. money isreceived as soon as the next business day.

Banking Circle Lending

i Source: https://www.bdrc-group.com/wp-content/uploads/2018/03/rES_BdrC_SmE_Finance_monitor_Q4_2017.pdfii Source: https://www.bdrc-group.com/wp-content/uploads/2018/03/rES_BdrC_SmE_Finance_monitor_Q4_2017.pdf iii Source: http://www.cityam.com/280376/forget-embracing-failure-startups-deserve-best-possible iv Source: http://www.bmmagazine.co.uk/news/half-uk-smes-unable-access-funding-needed-grow/ v Source: http://www.bmmagazine.co.uk/news/half-uk-smes-unable-access-funding-needed-grow/ vi Source: https://www.fsb.org.uk/media-centre/small-business-statistics vii Source: http://www.altfi.com/article/3994_2017_marketplace_lending_volumes_exceed_expectationviii Source: http://www.bmmagazine.co.uk/news/half-uk-smes-unable-access-funding-needed-grow/ix Source: https://realbusiness.co.uk/funding/2018/02/23/unscrupulous-banks-fuelled-rise-of-alternative-lenders/x Source: https://www.finextra.com/newsarticle/31888/tsb-launches-lending-marketplace-for-small-businessesxi Source: https://www.finextra.com/videoarticle/1778/disruption-in-sme-banking?utm_medium=videoflash&utm_source=2018-4-3&member=74508xii The research was conducted by Censuswide, with 250 financial decision makers and 250 directors and above in SmE’s that have an online presence in the Uk between 22.03.2018 -

29.03.2018. Censuswide abide by and employ members of the market research Society which is based on the ESOmAr principles.

Source references


Documents

THE EPIC BUSINESS LOAN BATTLE...loans anticipated, a 43% year-on-year increase.vi Businesses need cash. But, crucially, they need loans to be cost-eRective, account management to be