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The SME Finance Market - by Credit4


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Read the latest overview of the SME Finance Market and solutions available for growing small businesses. Understand the definition of a small business, and why that matters.

Important context in today's world of changing finance options.

Credit4 provide flexible funding solutions for your business.

Published in: Economy & Finance
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The SME Finance Market - by Credit4

  1. 1. Alternative Funding for the ‘S’ in SME
  2. 2. Supporting the ‘S’ in SME Chapters 1. Exploring the definition of SME 2. Are SME’s being catered for in the world of finance? 3. What alternative funding options are there? 4. Preparing your business for funding 5. How we assist in SME growth funding
  3. 3. Chapter 1. Exploring the definition of SME
  4. 4. Who or what is an SME? • The answer depends on what you read! • Many different definitions • Based on turnover • Number of employees • Giving a very Blurred ‘S’ business profile • Let’s Google SME…
  5. 5. Small: UK Companies Act 2006 Micro T/O<£6.5m <50 employees All the definitions differ
  6. 6. • The majority of businesses fall into small category • No specific differentiation of micro businesses, they are included in the ‘small’ • What we do know is that a huge proportion of the private business economy supporting UK growth sits in small • Growth in the sector has been significant as depicted by Government stats So far we know… 99.3% 0 – 49 Staff 5.3M businesses employing 12.4M staff Majority SME’s
  7. 7. Chapter 2. Are SME’s being catered for in the world of finance?
  8. 8. There are mixed messages on the funding available for them
  9. 9. Catering for a specific section of the SME population Media Coverage shows some SME funding is available All types of SME’s can apply for funding as long as they have been: • Trading for 3 years • Have a turnover of at least £1m • Operating profit of £100,000
  10. 10. We do acknowledge the high street banks have played their part and carved out their own niche in today’s SME financial sector. However this entails: • De-skilling so lack the specialist knowledge required to underwrite these enquiries • No appetite for this type of lending at this time • De-risking to reduce exposure in more speculative lending
  11. 11. • Approximately 173,500 SME applications are declined annually • This equates to 3,336 weekly declines, and we know • 1 in 20 ‘S’ business owners were put off and did not go elsewhere for finance • 166 a week stopped looking • 3,170 a week kept on looking Why are there so many rejections? • ‘SME’ is a broad spectrum • Lenders focus on, and lend to, specific ‘sections’ within this spectrum However, rejection puts off many The conundrum for an ‘S’ is where to look?
  12. 12. Chapter 3. What alternative funding options are there?
  13. 13. Where do ‘S’s go next for funding? Alternative FundingBank Do Nothing
  14. 14. The Alternative market place • Crowd Funding • Invoice Crowd Funding (secured by single invoice or debtor book) • Equity Crowd Funding • Balance Sheet Funding (Term lending, asset finance, cashflow, growth funding, EPOS based funding etc.) Funding Platform Invest Interest Repay Crowd Business Equity Borrow Repay Sell Shares Funder Borrow There are alternative funders available, notably; Alternative Funding Sector = Choice from over 100 Funders
  15. 15. How to access this market Access to the funders is surprisingly easy, if you know where to look! • Direct to each lender via their web site • Using a specialist Financial Adviser • Using an aggregator site • Social Media
  16. 16. Aggregator sites collect your information and present options to you You answer questions about: • Funding requirements • Trading History • Security available • Projected profits • How long funding is required
  17. 17. Once you have found potential funders there are several important points you need to consider: • Is the funding appropriate? • Are there comparable products? • Do you know the actual costs? • Is this complimentary to existing funding? • Are there any penalties for redemption? • What security will be required, and will it affect the business? Knowing the answer to all of the above is imperative to ensure you obtain the correct funding Specialist financial advice can be obtained from NACFB
  18. 18. Chapter 4. Preparing your business for funding
  19. 19. CASHFLOW FORECAST, arguably the most crucial yardstick by which the affordability of credit is usually judged by the prospective lender. The forecasting process: pleasure or pain? Optimistic v Pessimistic v Realistic: the truth will out! Understand the outputs: external help is available 1. Cashflow
  20. 20. 2. Management Accounts Why have them? • Turnover • Costs • Gross Profit • Admin Costs Indicates Net Profit How often? • Daily / Weekly / Monthly / Half Yearly… Cloud Technology is available some lenders require access to view business transactions Value
  21. 21. • Is it worth the time, effort, & cost • A window for the business and the people behind it • Be prepared to answer questions • It demonstrates market knowledge • Provides a benchmark for future performance • Most entrepreneurs ‘Talk the Talk’ but cannot transfer their enthusiasm onto paper 3. Business Plan
  22. 22. Chapter 5. How we assist in SME growth funding
  23. 23. • Established in October 2013- Brief ‘to fill the SME growth funding gap • Start up funding/grants-£25,000 2nd tier funding £150,000+ • Funding for all business growth for businesses trading 1+ years • To provide innovative products with absolute clarity of pricing • Credit4’s flexible funding is available to a range of UK businesses including • 70% of ‘S’ in SME’s are sole traders and partnerships! • Credit4 has two types of funding available: ‘Flexible Facility’ and ‘Dual Growth Funding GAP
  24. 24. Flexible Funding *£15k - £50k *12 months *Arrangement Fee 4% *Interest serviced fortnightly *Capital repaid at the end of the term £15k £50k 1 2 3 4 5 6 7 8 9 10 11 12 Paid on completion *Flexible to us, repay, redraw as often as you like
  25. 25. *12-24 months *Arrangement Fee 3.5% *FF Interest serviced fortnightly *Amortising Term Loan repaid monthly *Capital repaid at the end of the term £50k £100k *£50k - £100k 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Paid on completion *Flexible Facility PLUS fixed term loan to extend total value
  26. 26. Businesses must be UK registered The funding MUST be used for business growth opportunities All directors/Owners must provide a suitable Personal Guarantee Funding must be for £15,000 - £100,000 over 12 – 24 months There are 4 basic requirements:
  27. 27. • We do not underwrite by algorithm • We take time to get to know the business owners and their business • We get to know the business drivers and understand the growth potential • We look to support the businesses from their early years and will signpost clients to appropriate funders when applicable How are we different?
  28. 28. Summary • The significant percentage of the ‘S’ in SME refers to MICRO business • The M (representing 0.6% of the business community) are generally the businesses used for reporting lending availability in the SME sector. • Start up grants and loans are available (usually on a regional basis) • Funding for businesses with 2+years trading history and minimum turnover of £200,000+ has become increasingly available • Funding between start-up and 3 years+ trading is still difficult to obtain • Alternative Business Funding provides SME’s with CHOICE • Alternative Business Funding provide SME’s with TAILORED options • Credit4 is one of the funders who fund business GROWTH from early years onwards where appropriate for the business