Putting the feeling back into Business Finance
Discussing how modern day high street bank loan approval processes have lost the human touch resulting in declining approval rates across the sector.
Business loans are extremely common, and are normally the first port of call for SME’s when looking to raise capital to grow their business. In 2019 45% of SME’s used external finance, which had increased from the 36% reported in 2018[1] and this figure is expected to continue to grow.
Applying for any business finance used to be a case of making an appointment with your Bank Manager, sitting down for a chat about your plans and going through your forecasts. In the modern world the relationship between business and bank has become purely transactional, with the rise of technology and development of algorithms, much of application process has become automated, with facts and figures making all the decisions, removing the element of gut feeling and belief.
This has resulted in main stream banks mostly opting to fund the larger businesses, or very low risk automated decision making , with SME’s struggling to ascertain the financing they need to grow. Barriers such as lacking track record, credit history, or minimal collateral make lending to smaller enterprises unappealing to traditional lenders, with 40% of loan applications being declined.[2] After facing these repeated setbacks, many SME’s appear to have ‘given up’ on growth as it has been reported that ‘In the UK over 73% of SME’s would rather grow more slowly than try to borrow’[3], and over 1 million or 17% of all SMEs citing access to finance as a major obstacle to growth[4].
But like a raincloud after a period of drought, there is a silver lining. Community Development Finance Institutions (CDFIs) like Let’s Do Business Finance, are devoted to servicing those who are overlooked by mainstream lenders, helping them not only with their financing needs, but also with dedicated business support to ensure that they are getting the right product, the right amount and at the right terms.
Over the last 5 years, CDFIs have lent over £1bn to small businesses unable to get term finance from banks[5] acting as important delivery partners of government programs such as Start-Up Loans, Coronavirus Business Interruption Scheme (CBILS) and Recovery Loan Scheme (RLS) supporting the creation, survival and ongoing recovery of SME’s all over the UK.
Let’s Do Business Finance, who operate all across the South and East of England providing Start-Up Loans, Growth Loans, and the Recovery Loan Scheme as accredited delivery partners by British Business Bank, have a reputation for our individual, human approach to lending. Opting for the ‘old school’ approach to approval, we really get to know our customers, basing the decision not only on what figures say but on the person/people behind the business as well. As well as submitting the required paperwork, the application process includes a consultation with an experienced business manager, giving you the chance to really explain your plans and goals, and them the opportunity to really understand your business before a final decision is made.
Our approach at Let’s Do Business Finance is something that is widely commended and respected amongst the business community, resulting in a host of referrals from previous customers, and repeat borrowing as those businesses continue to grow.
“I’ve never been able to get funding from a mainstream bank. It’s been so frustrating as we had a history of repayments, but they just wouldn’t accept it. Something that has been so refreshing in dealing with Let’s Do Business is that you are dealing with a human being that’s actually talking to you, and listening to you, as well as looking at the figures. They look at the whole picture and not just the piece of paper.”
“I think Brendan’s comments say it all in terms of our approach and how we do things. Yes using technology and algorithms makes sound business sense for shareholders of mainstream lenders and funding platforms, but we’re about getting under the skin of the business to make our decisions. And with the Start Up Loans eligibility criteria expanding to include businesses trading up to 36 months, we’re looking forward to helping even more businesses start up and grow following the effects of the pandemic.”
If you are looking to grow your business, but are unsure what business financing might be best for you, then do get in touch.
[1] SME Finance Monitor, BVA BDRC, March 2020
[2] SME Finance Monitor, BVA BDRC, March 2020
[3] Unlocking Inclusive Growth, Responsible Finance, Sept 2021.
[4] Longitudinal Small Business Surveys 2015 and 2019, Employers and Non-employers, Question G2.
[5] Unlocking Inclusive Growth, Responsible Finance, Sept 2021.