Have we bashed the bankers enough?
A cursory look into how to access funding for growth will bring up a labyrinth of options – invoice finance, asset finance, funding circles, equity investment, crowdfunding.
You would think that with so many alternative finance streams some of the heat would be taken off the banking sector. But many businesses in the region still remain frustrated by the banks when it comes to funding growth.
This frustration is partly justified if you consider the banking sector’s role in the economic downturn; the libor scandal and its too big to fail – privatise the profits but nationalise the losses mentality.
And with heavyweight economic commentator, and ‘recovering banker’, Max Keiser, recently labelling them as ‘banksters’ – there is clearly a lot of healing to do.
But scratch beneath the surface and our region has seen some funding success stories related to bank lending, which tell a different story – one of companies with impressive trading histories and physical assets getting funding.
So how are they funding existing businesses for growth?
Gary Burton, HSBC South West and Wales Regional Commercial Director, comments: “Our net lending is up strongly for the year and we have seen strong demand for a range of financial products, including commercial mortgages, asset and equipment finance, invoice finance and trade facilities for companies exporting and importing, as well as traditional debt in the form of term loans and overdrafts.
“In terms of sectors, agriculture and manufacturing have been particularly active, especially where those firms have an international dimension to their business, and of course food and drink is always an important component of the South West economy.”
Lye Cross Farm
One company HSBC recently helped through a seven figure finance package is Lye Cross Farm in North Somerset, which is making significant investments in its infrastructure to increase the amount of cheese it produces by around a third.
This business exports its produce to 30 countries globally, as well as through major UK retailers, so it is a great example of a company that is taking a traditional domestic product, Cheddar, and bringing it to markets such as Korea and the US
Another business HSBC supported towards the end of 2013 is tReds, a Weymouth-headquartered fashion footwear retailer that wants to increase its store network from 33 outlets to 40 during 2014.
Over-hyped by the press
Simon Taylor, who is Managing Director of QCR – a machinery recycling rental and water management firm – believes that reality isn’t quite the perception, when it comes to bankers.
He comments: “We wanted to acquire another company and received great support from the banks. The way they acted contradicts the banks aren’t willing to lend mantra. It’s not like you read in the papers and the situation is over-hyped by the press.
“Banks can’t start lending to those that don’t pay it back. It’s a no win situation because if they don’t lend they’re ripped to shreds and if they do there is an issue. Businesses are likely to get lent to if the risk is reasonable.”
So what has set them apart?
Gary comments: “What links these two businesses is the type of finance they are utilising to help fund their growth.
“Both have used funding that makes use of their assets and it is clear that the type of finance businesses are using is changing, with trade, invoice and equipment finance becoming more popular.
“Companies, particularly those that are capital intensive, no longer just rely on traditional debt-based lending; they are using alternative solutions and finance that utilise the company’s assets and is helping their funding needs.”
And Gary says that not much has changed in what the banks are looking for.
He comments: “We look for similar fundamentals in all businesses, regardless of what sector they are in or what size they are. A strong management team, a clear, realistic and achievable business plan, well managed cash flows and robust customer base are all factors banks take into account.”
Funding for Lending Scheme
Tough and robust talk from politicians is also common, as are new initiatives and schemes such as Funding for Lending.
David Beaumont, an Area Director, SME Banking, for Lloyds in the South West comments: “Since January 2013 we supported 94,000 start-ups and have a five per cent year-on-year net growth in advances to SMEs.
“In addition, we champion the Bank of England’s Funding for Lending Scheme (FLS) and encourage growth for UK businesses by offering discounts of one per cent to all SMEs for the life of their loans.
“Since September 2012 we have committed £6.3 billion to our small and medium-sized customers through the scheme.
“Crucially to this region, FLS has helped many South West Businesses to either invest in their company or start new projects.
“One such firm, Hunters Urology, was able to take advantage of this discount offered on a £200,000 business loan, enabling it to increase its range of healthcare products and invest in a medical device which is 100 per cent bio-degradable and environmentally friendly.”
No more hibernation
Martin French, Barclays Head of Bristol and Large Corporate, South West also feels as if the mood is changing and that the reputation surrounding bank lending is unjustified.
He comments: “Where they may have previously retrenched, a greater number of companies we are talking with now are looking at how they can take their businesses forward in a viable way and are approaching their lenders to support this
“From a lender’s perspective, there is a definite appetite to lend to and support strong, well managed businesses as they look to grow.
“Barclays has increased net lending to UK individuals and private non-financial businesses since the start of Funding for Lending (FLS) by £6.66 billion.”