There is more choice available than ever for businesses looking for finance and the rapidly changing lending landscape is set to continue to offer borrowers scope, writes Jerry Frank.
Securing access to the right finance is crucial for business growth. And over the past decade the variety of financing available for businesses, particularly small to medium-sized enterprises (SMEs), has proliferated as regulatory and technological change and ready capital have altered the financing landscape.
That has delivered more choice in the South West, as it has nationwide, and the pace of change and competition looks set to continue to create diversity. John Wood, corporate partner at Bristol law firm TLT, says:
In the last few years, funding options for businesses have multiplied rapidly.
New sources of finance have emerged initially in response to the contraction of debt supply after the financial crisis and tougher regulations that constrained lending. Asset-based lenders have made ground, and technological innovation has allowed the peer-to-peer funders and crowdfunders to expand.
The new breed of challenger banks has also stepped in where traditional lenders had feared to tread. The high street banks that were the dominant avenue for finance for regional businesses only a decade ago face a surge in competition – which has spurred an increase of choice for borrowers.
In October, one of the new UK challengers, Shawbrook Bank, opened a regional business centre in Bristol, which is one of seven initial hubs it has launched across the UK to develop closer relationships with regional business through a network of on-the-ground specialist advisers.
Terry Wolfendale, South West managing director for Shawbrook, says the centre would target Bristol’s “diverse and exciting economy” and business in the wider region. “We’re focused on working with SMEs whether they’re looking to finance new kit or invest for growth,” he says.
Steve Pateman, chief executive of Shawbrook, says regional teams are vital for the challenger bank’s business model. “For many SMEs, access to funding depends upon a banker taking the time to understand what they’re trying to achieve, the dynamics of their specific market and their trading history.
Having experienced bankers on the ground, who know the local economy and have access to sector expertise, enables us to offer these businesses another choice – a genuine alternative from what they might find elsewhere.”
But this sea-change for business borrowers has required the more established lenders, too, to redouble their efforts to compete with the new pretenders – and improve their services even if their lending criteria remain tight. TLT’s Wood says: “We are also seeing new creativity from the banks.”
Faced with this competition, the big five high street banks – RBS, HSBC, Lloyds, Barclays and Santander – have had to find ways to shore up their position and cater for borrowers. This has required banks to tailor options to reflect a client’s business, its needs and where it is in its lifecycle.
Wood says: “Banks are also making moves to offer more peripheral support to business customers, such as platforms that allow businesses to network.” Government loans, peer-to-peer lending and crowdfunding provide access to crucial funds for startups to get off the ground.