David Prosser of the Independent reckons that SMEs need to force the issue in respect of funding – the link to the full text of his article in the Sunday Independent on July 20 can be seen below this blog.
In essence, his argument is that SMEs suffer from terminal apathy and are very reluctant to move banks even when they are turned down for funding by their existing provider, on the basis that ““they’re all the same” – which feels like a lazy, ill-informed reason for sitting on your hands”.
He goes on to say that “there is simply no point in encouraging new banks to enter the SME marketplace, ……. unless smaller businesses are prepared to take advantage”.
He does mention with approval that “..…new entrants to SME banking – the likes of Metro Bank, Aldermore, Shawbrook and others – should be less affected by the ‘all-banks-are-the-same” mentality. Equally, new players from outside the banking industry are also potentially disruptive – the crowdfunding platforms, for example”.
In a completely free market suppliers will not change unless their customers provide the demand, and therefore Mr Prosser’s point seems to be well made, and the onus should be on the SMEs themselves. However, if we want to get the economy moving – and most commentators seem to agree that an important part of future growth should come through the SME market – surely there should be political will and pressure behind it?
The average SME management team – apart from at the larger end – has very little expertise in finance, let alone the alternatives available to them in terms of funding. Whilst those alternatives are becoming more numerous, the hurdles which a business owner has to cross can seem very intimidating, and of perhaps more concern is that there are few advisors who can genuinely help them to achieve their goals.
So what should be done?
Contrary to Mr Prosser’s conclusion that new entrants should not be encouraged, I think quite the reverse, and that the more new entrants into the market, particularly those that make a big splash, the better.
In addition more advisors should be encouraged to take on board the skills necessary to help this sector. To that end, the Government Growth Voucher scheme needs to be broadened to target the smaller businesses which could seriously benefit. At the moment an advisor is restricted so that he can only register for one of the skills covered by the scheme, yet advisors to the smaller SMEs – particularly accountants – should be able to cover a range of business areas to the benefit of their clients, and should be positively encouraged to involve their clients in alternative sources of funding, to the benefit of both their client and the broader market.
