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Council launches service to help local businesses access finance

Cheshire East Council’s arms-length Skills and Growth Company has launched a dedicated service to help local businesses access finance to boost their growth.

The Access2Finance service is in response to the findings of the latest Cheshire business survey, commissioned by the council, which found that 28 per cent of businesses said not accessing finance was a barrier to their growth. Nearly 40 per cent of them claimed that cash flow problems were also hampering their expansion plans.

The findings echo national research from the Financial Times, which revealed eight out of 10 business loans are provided by the big four banks and only three per cent of small businesses seek alternative finance options if turned down by their bank.

Access2Finance is a bespoke service to to help businesses navigate the many types of finance available, including grants, loans and equity finance, to help select the right funding for their business.

Councillor George Hayes, chairman of the Skills and Growth Company, said: “The Access2Finance service will provide a much-needed, impartial and personalised approach to ensuring businesses can source the right investment, at the right time, in order to fund their growth aspirations.”

The full Cheshire business survey results are available online.

Source: Alderley Edge

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FCA pledges to give SMEs access to Financial Ombudsman

The Financial Conduct Authority (FCA) has called for changes to the Financial Ombudsman Service(FOS) to extend their protection to SMEs.

Currently only available to individual consumers and “micro-enterprises”, the review proposes allowing an additional 160,000 UK SMEs, charities, and trusts access to the redress service.

Who is the Financial Ombudsman?

Formed by Parliament in 2001, the Financial Ombudsman Service is an independent body responsible for settling individual complaints between consumers and financial service providers.

When a customer and a business cannot resolve a dispute themselves, the FOS provide an unbiased view of the situation and propose a course of action.

In 2016, the FOS dealt with more than two million complaints, ranging from problems with credit cards and PPI to debt collection and car finance. When a dispute is brought forward, the service will investigate the case and report their findings.

Under Government legislation, the decision of the FOS is final and legally binding.

However, not everyone is able to access their services. To be considered, the claimant must be considered as an ‘eligible complainant’ by the FOS. Under the current rules, this is restricted to individual consumers, micro-businesses (those with less than 10 employees with an annual turnover of no more than 2 million euros), and charities.

According to a Business Statistics report, there were 5.7 million SMEs in the UK in 2017. Although 97% of these were micro-businesses, that leaves 200,000 small and medium businesses with no access to a financial ombudsman should they have a complaint.

So, what have the FCA said?

The FCA issued a press release on their website earlier this week announcing the start of consultations around plans to give more small businesses access to the FOS.

The FCA said that small businesses currently have the option of settling disputes with financial services themselves in court, but that they may “struggle to do so in practice”.

They have proposed the FOS should consider complaints about any regulated activity, including personal guarantors of corporate loans.

Andrew Bailey, chief executive of the FCA, said “it is important for everyone, including financial services firms, that there is an effective dispute resolution mechanism for businesses”.

Bailey went on to say that the FCA’s “evidence suggests some small businesses currently find it hard to achieve a fair outcome in disputes with financial services firms because court action is not a realistic option for them.

We have considered what could be done within our powers and the remit of the Financial Ombudsman Service to improve this situation and are proposing to expand access to the Ombudsman.”

Why have the FCA called for change?

The FCA recently published a report on ‘an independent review of Royal Bank of Scotland Group’s treatment of small and medium-sized enterprise customers referred to the Global Restructuring Group’.

This was following allegations that a group of small business customers of the Royal Bank of Scotland (RBS) were pushed to the point of collapse after being referred to RBS’ ‘Global Restructuring Group’.

According to The Times, staff of the bank were “advised to extract money from small businesses that were in the most financial difficulty” in an unpublished memo.

Whilst an independent review, commissioned by the FCA, concluded there was no evidence of systematic misconduct, the scandal opened conversations around the lack of options for SMEs that feel they have been mistreated by their bank.

Since then, talks have moved to giving small businesses the same free regulatory protections and dispute resolution options as individual retail banking customers.

What will the change mean for SMEs?

If the changes are agreed during the consultations, 200,000 SMEs will have access to the Financial Ombudsman Service. Should they have a complaint against a financial services provider, they will be able to utilize the FOS’s investigation and redress scheme without needing to go to court.

Currently, the FOS can award compensation of up to £150,000 if they find a consumer was mistreated by a financial service business. However, if the changes are to include higher-value SME disputes in the FOS’s scope, the FCA has proposed this limit be raised to £600,000.

The Financial Conduct Authority has also said that additional investment will be needed to enforce these changes and that the funds “would be borne by the industry… through higher fees or levies.”

With the consultations expected to come to a close by 22/04/2018, the FCA has said they will publish a Policy Statement detailing the final decision and rules in summer 2018.

Source: CL News

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Applying for finance: The five common mistakes made by startups

When you decide to apply for a loan to kick-start your firm’s growth, it’s a daunting task as much as it is an exciting one.

Essentially, you’re putting your business out there and opening it up to potential scrutiny. This means you have to find a balance between making your business an attractive proposition, while remaining realistic about your financial achievements to date and what the short-term future has in store.

In all the excitement, mistakes are common. Here are five mistakes and some sensible solutions to get you off on the right foot.

Not having an up-to-scratch business plan

Any bank, lender, or other funding source will want to know why you want the money, what you’re going to use it for, and, ultimately, why it’s worthwhile them lending to you (that is, how you’re going to make them more money in the long-run).

If your business plan is just pie in the sky or hasn’t been put together well enough, then either no one will want to lend you any money, or the money you are lent will be given to you at a really poor rate.

Being able to quantify your projected growth through sturdy financials is a must, and should be at the heart of your business plan.

Trying to go it alone

When you’re the proud owner of a startup or scaleup, it may be tempting to take on as much as possible, and keep everything in-house in order to protect “your baby”.

But enlisting a professional to assist with your business plan, until you’re good enough to do it yourself, is a very sound investment.

There are many startups and scaleups whose owners lack the specific accountancy experience required, and there is absolutely no shame in asking a professional help to ensure you have a proper business plan.

As hinted above, lenders will eat you alive if you can’t back up your finance application with a sturdy business plan. You need to wow potential investors and funders with your strategy if they are to give you any money, so it’s worth committing time and resource to it.

Taking the first offer on the table

It’s understandable that, in their hunger to secure an offer, startups are often guilty of taking the first one on the table – often out of fear that they won’t get anther one. But this is a huge mistake.

Even in the haste of it all, it’s essential to “shop around” and ensure you have a number of offers to choose from. Each offer will naturally have their pros and cons.

When we were scaling our business, we weighed up no less than 10 offers before picking one. The one we chose allowed us to run the business exactly in the way we wanted, and gave us longevity.

The others ticked some big boxes at the time (and would have been easy to accept if we hadn’t been patient), but in the end they weren’t right for us.

Have confidence in your business, sell the dream in the right way, and offers will come. Once they do, be sure to capitalise without jumping in too quickly.

Not being clear on what the money is for

I touched on this earlier, but it’s worth exploring in more detail. What do you actually want the money for? Are you expanding your premises nationally, or maybe internationally?

Perhaps you are on a recruitment drive, or developing a new product in-house.

Whatever your needs, be sure to explain these clearly in your loan application to avoid the common mistake of “money for money’s sake”.

Why borrow £5m now if you actually only need £1m to meet your immediate objectives?

Many startups make the mistake of asking for more than they need, despite it being universally known that banks use a variety of formulas to work out how much they think you can afford to borrow.

One way of helping a potential lender understand your business needs is to develop a relationship with them before you actually need finance. That way, they’re already on board with your vision, and the conversation further down the line will naturally be a much easier one.

Immediate priorities aside, it’s also a good idea to build a contingency into the amount of working capital you budget for when applying for a loan – there are always things that come up, which even the sturdiest business plan cannot anticipate.

Assuming banks are the only funding source

Some entrepreneurs assume that the only feasible option is to apply for a bank loan, largely because they’re the most conventional and widely advertised. But this isn’t the case. In fact, it’s far from it.

There are many funding solutions offered in the alternative lending marketplace – an area that has experienced significant growth of late and become increasingly popular with the startup community.

The majority of alternative finance lenders are fine with borrowers who have impaired or bad credit, or have a limited business history, making them well suited for young businesses.

Again, there is a wider point here around doing your research to find the best deal. Don’t simply go down the mainstream route because it’s the most accessible.

Source: City A.M.

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Brexit fear greatest among innovative SMEs

THE most innovative and “economically important” small and medium-sized firms in the UK may be hit hardest by Brexit, new research warns.

The study, from the University of St Andrews, notes Brexit is viewed as likely to result in lower levels of capital investment, reduced access to external finance, lower levels of growth, reduced product development and lower levels of business internationalisation for small and medium-sized enterprises (SMEs).

The research has found concerns about Brexit are not felt uniformly across UK SMEs. The university says the results suggest Brexit-related uncertainty is likely to affect larger, export-oriented firms in the SME bracket and those in hi-tech and service-related industries most. And the study notes innovative SMEs “seem particularly concerned by Brexit”, and may be the most negatively affected.

SMEs based in Scotland and Northern Ireland view Brexit more negatively than their counterparts in England and Wales, the research has found.

The University of St Andrews notes this in part mirrors the “differentiated voting patterns” across the UK in the June 2016 European Union membership referendum.

Ross Brown, reader in entrepreneurship and small business finance at the university, declared reduced capital investment “critically weakens and undermines” SMEs’ ability to grow and prosper.

Source: Herald Scotland

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Invoice financing reaches record high in UK

Figures from finance and banking trade association UK Finance have shown invoice financing has reached a record high of more than £22 billion.

The figures showed an increase in invoice finance to businesses in the third quarter of 2017, with a year-on-year rise of 13 per cent.

Growth

A number of invoice financing firms have driven growth in the invoice finance and asset-based lending sector. Global electronic invoicing firm Tungsten Network Finance announced its total originated invoice outstandings have reached a record £54.5 million. This is up from 89 per cent of £28.8 million in October last year.

Despite the positive figures, there are concerns about how negotiations over Brexit will affect invoice finance levels, with research from tech services company Equiniti showing a connection between the confidence of businesses when borrowing and economic fluctuations in the UK. Figures from the analysis showed declines in GDP growth have had a knock-on effect on the confidence of businesses when it comes to invoice borrowing.

Encouraging

Commenting on UK Finance’s figures, UK Finance Director of Invoice Finance and Asset-Based Lending Matthew Davies said there is increasing understanding among businesses of all sizes of how invoice finance and asset-based lending are able to support them as they grow. It’s encouraging that a significant proportion of the sustained increases in lending recently is helping to boost exports.

However, he added  more funding could and should be provided through invoice finance, and called for the UK Government to bring forward long-awaited legislation to provide smaller businesses in particular with access to much-needed capital.

Source: LSBF

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Boost for alternative lending market

Advisers rejected by banks and other traditional lenders should consider the alternative lending market, a lending specialist has said.

Jamie Stewart, director at Think Business Loans, said that between November and December the sector saw a huge demand for its services, largely coming from the adviser market.

But Mr Stewart said some advisers are still reluctant to approach the alternative lending space because they have a perception it is costly and complicated.

He said: “Nearly 100 per cent of our clients have been turned down by their banks and then plopped into the world of alternative lending, not knowing where to start. But a lot of these peer-to-peer business loans are cheaper than the banks.”

Advisers approaching the company have cashflow and investment enquiries, with some businesses potentially looking to increase their pay-per-click marketing spend or wanting to expand.

Mr Stewart added: “IFAs come to us for a number of funding requirements: in fact, the whole spectrum of purposes, from aspirational stuff like management buyouts, acquisitions, and more general funding like asset finance, cashflow loans, commercial property investment and development projects, to more niche requirements around pension-led funding, as well as private equity, and investment opportunities via the alternative market.

“As there are now so many [fund] boutiques throughout the sector, many will happily take a look at a creative project, which is drawing in the interest of more and more IFAs to this market and our application.”

Advisers are also looking for funding to help develop their tech capabilities. More recently, advisers have been seeking additional capital to help clients with bitcoin needs. Due to the nature of this industry, traditional banks are relatively averse to the entire sector, which has drawn advisers to the alternative commercial finance market.

Mr Stewart said: “In the past six months, bitcoin mining has been big. IFAs are helping their clients to mine bitcoins by buying servers and hardware machines.”

The lenders on Think Business’s panel have a broad lending criteria, ranging from, the amount required versus turnover, the purpose of the funding, director and shareholder ownership, to experience and historic business performance. The panel also includes traditional and alternative lenders.

A report in December by the Cambridge Centre for Alternative Finance, found that in 2016, business funding transacted for start-ups and small and medium-sized firms grew by 50 per cent to £3.3bn, from £2.2bn in 2015.

In total, it is estimated that 33,000 firms used various debt, equity or non-investment based alternative finance channels and instruments to raise funding, which represents around 2.5 per cent of the UK’s 1.3 million employers.

Back in November 2016 the government launched a bank-referral scheme to urge banks to pass on the details of small businesses they have turned down for loans to finance platforms, who would then share the details with alternative finance providers to approach those businesses concerned.

Jane Hodges, financial planning managing director at Money Honey, said alternative finance, enterprise investment schemes and using the services of networks were among the sources of funding available to advisers.

Source: FT Adviser

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How SMEs can survive and thrive in 2018

There’s a bulk of changes taking place in the UK, and indeed the wider world, which are set to impact the business community in one way or another.

Let’s look at some of the trends that might affect your company in the year ahead.

Your online presence will be even more important

According to the Capital Economics’ SME Growth Tracker, 90 per cent of British businesses plan to sell their products online by the end of 2018.

As it stands, just 64 per cent sell online, but it’s largely the smaller companies that plan to make headway by selling goods on their own websites.

Huge strides will be made in tech

The government’s industrial strategy, which puts tech at the top of the priority list, is set to give British industries a boost, particularly companies in the construction, artificial intelligence (AI), automotive, and life science sectors. It’s also thought that AI products could become accessible to small firms as costs come down.

But in a burgeoning tech world comes the increased threat of cyber attacks. Make sure you have the systems in place to protect your business from this danger.

You face a surge in regulatory changes

2018 is the year when regulators introduce a whole host of new rules, including Mifid II, PSD2 (which includes Open Banking in its midst), and GDPR, to name but a few.

For many businesses, this has been, and will continue to be, a huge operation to ensure they meet the necessary standards.

Plan a time each week or month to review your progress so you can comfortably meet deadlines.

The gig economy will grow

As more people go freelance in preference for flexible hours, we will gradually see the end of the traditional 9 to 5 working day.

In fact, a report from Timewise and EY, indicates that a whopping 87 per cent of British workers are either keen to work flexibly, or are already doing so.

Companies should take stock of this – and perhaps look at measuring employees’ on what they deliver, rather than the hours they sit at their desk.

Giving employees more freedom could actually benefit your business in the long run.

Keep a beady eye on Brexit

You’ve probably had enough of the dreaded “B” word, but it’s crucial to keep one eye on the outcomes of negotiations to gauge the potential impact on your business, particularly if you import or export goods.

In fact, research from the CBI in November found that optimism among SME manufacturers had deteriorated for the first time in a year as growth slowed and pricing pressure increased. Yet it’s not all doom and gloom, because the research found that companies were spending more on staff and innovation.

This year it will be more crucial than ever for British businesses to stay on their toes if they want survive, and ultimately thrive.

Peter Alderson, managing director of business finance group ​LDF, says:

“For many business owners across the UK, January is a time to consider the year ahead. Some will be adapting to accommodate pending changes in regulation, while others will be facilitating new business development, or recruitment aims. It’s very much a time for taking stock.

“There’s no doubt that a number of changes are coming for small business in 2018 which will, in turn, create some challenges over the next couple of years.

“Access to finance remains a critical consideration for UK small business, and more are exploring financial options outside of traditional bank offerings that can support the level of business development needed to compete in new tech and online spaces.

“It’s crucial that businesses, are financially agile enough to adapt.

“We’ve seen a large uplift in demand for our services in the last 12-months, which saw us deliver over £500m in funding to small business in 2017, up more than 30 per cent on the previous year, and this shows no sign of slowing.”

Source: City A.M.

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SMEs optimistic about obtaining finance in 2018, report shows

A report from retail bank Aldermore has shown small and medium-sized businesses are optimistic about obtaining finance over the next year.

The Aldermore Future Attitudes report surveyed more than 1,000 business decision-makers across the UK. They found 75 per cent are confident they will be able to access funding to achieve their growth ambitions, up from 63 per cent in Q4 2016.

Positive

The report also showed businesses are positive about their revenues, with more than 40 per cent expecting their revenues to increase over the next 12 months, compared to 39 per cent in Q4 2016. Eleven per cent of respondents said they are expecting their profits to increase significantly over the next 12 months.

Business owners also revealed how they plan to achieve revenue growth, with 50 per cent planning to boost their marketing efforts. 38 per cent are planning to launch new products, and 33 per cent say they will boost profits by entering new markets.

Crucial

Commenting on the report, Aldermore Group Managing Director of Business Finance Carl D’Ammassa said it’s encouraging that optimism among SME leaders is increasing, with attitudes towards business revenues positive for the next 12 months.

He added SMEs make an essential contribution to the economy and with Brexit progressing, their ability to get finance and help support the economy is crucial.

Source: LSBF

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FSB launches new FinTech platform to fund small business growth

A new FinTech platform regulated by the FSA launches today (10 January) aiming to help further the success of the UK’s small business and self-employed communities amid the findings of latest research that the cost of doing business in the capital is stifling small firms.

Access to finance is crucial to the small business sector which accounts for an annual turnover of £1.9 trillion a year – 51 per cent of all private sector turnover in the UK.

The FSB Funding Platform, developed by Finpoint, uses intelligent matching technology to match applicants with over 100 finance providers.

A pilot of the platform for FSB members in three UK regions shows that the average amount of finance a small business applies for from an alternative finance provider is £39,000 – half the amount sought from banks’. With 40 per cent of small businesses seeking alternative finance for equipment purchases and 40 per cent for working capital to fund short-term operations or cover late payments.

FSB’s London Chair, Michael Lassman said:

“We’re so pleased to be able to offer this exciting platform to our member base. Although it’s harnessing the latest innovations in tech it offers a very simple way to access finance, as well as access to human financial advisers. It will transform the business funding market and is a real step change for small businesses.”

Finpoint Managing Director Guy Bridge explained:

“We saw not enough transparency in the market, and we remain motivated by how we can use technology to provide an efficient service, but perhaps most importantly, we were keen on providing high quality customer service, which means any one of us may be on the phone when you call us up with a question about your funding needs. We quite like the label “FinTech”, because it is a mixture of Technology and Financial Services, with a heavy emphasis on “service.

“We’re thrilled to have been awarded the contract to provide FSB’s funding platform. As a small business ourselves – and a member of FSB – we get what’s needed, how small business would like to use the platform and we’re truly excited.”

Source: London Loves Business

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SME bosses optimistic about funding options in 2018

Nearly half of UK SME bosses think their business’ revenues will increase in 2018, thanks to better funding options.

The latest Aldermore Future Attitudes report reveals that three quarters (75 per cent) of SMEs, representing 4.13million* small and medium sized businesses across the UK, are confident that they will be able to access the funding options they need to grow their business over the next twelve months, compared to only 63 per cent in Q4 2016.

The report, which surveyed more than a thousand-business decision-makers across the UK, found that business owners are also more confident that their revenues will rise over the coming year. The methods of securing this growth vary with half (50 per cent) planning to increase marketing efforts, just under two fifths (39 per cent) launching new products or services, and a third (33 per cent) entering new markets.

In total, more than two in five (42 per cent) SME owners think they will see an increase in their revenues, compared to 39 per cent in Q4 2016, with over one in ten (11 per cent) of bosses expecting to see a significant increase in profits over the next twelve months.

Carl D’Ammassa, group managing director, business finance at Aldermore, says, ‘It is encouraging to see that optimism amongst SME leaders is increasing, with attitudes towards business revenues staying positive for the next 12 months. SMEs make an essential contribution to the UK economy and with Brexit discussions progressing, their ability to obtain finance and help support the growth of the UK economy will be crucial.

‘Planning can be a difficult task, but to ensure ongoing success, every business owner needs to have a vision for growth and an understanding of how they would like to get there.’

Source: Small Business