Paul Evans, area director for SME Banking in Central London,Lloyds Bank Commercial Banking
SMEs are one of the main drivers behind the British economy. Collectively they make up 99% of all businesses in the UK and contributed £1.2 trillion in turnover during 2014, according to the Department for Business Innovation and Skills. It’s clear that SMEs are crucial to the UK’s sustained recovery as well as the health of the labour market, with more than 25.2 million people employed in this sector over the past year.
With the economic recovery in full swing this year, and while the Bank of England keeps interest rates low, we believe there’s never been a better time for SME business owners to look at growing their business and expanding for the future.
However, the latest Business in Britain Report from Lloyds Bank showed SME confidence in London has cooled ever so slightly since the start of the year,even though firms expect an overall increase in profits and orders. Although the findings revealed that confidence overall remains high, the latest report is evidence of a higher level of caution from some small businesses regarding their prospects. The results also indicate that while eight per cent of firms in London plan to invest more than £1 million in the next six months, a quarter don’t plan to invest anything.
With this mind, we wanted to remind SMEs of the number of ways finance can be obtained to help both sustain and encourage growth. Whether businesses are looking to potentially expand into new markets,develop new products and services,or simply want to increase their production capabilities to meet growing demands, there are a number of ways that they can receive support.To get businesses to start thinking about their growth opportunities, and to instil confidence,we’ve highlighted three key things to consider:
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The first, and potentially most crucial point for SMEs to consider, is the wide range of finance options that can be tailored to their needs. Some of the general finance options available include alternative finance, such as peer-to-peer lending, as well as more traditional funding methods. However, for many small businesses, bank funding holds greater appeal, both because of the number of specialist finance products now available, and because of the market expertise that relationship managers hold. Typically banks are geared to offer sector specific funding options tailored to countless industries, rather than just a one-size-fits-all offering.
In my view, this is invaluable to growing firms. Dedicated relationship managers at banks are also a good source of expertise, and can act as a useful sounding board. They are often well connected locally and incredibly knowledgeable about the opportunities for, and challenges facing, Britain’s small businesses. Certainly at Lloyds Bank these individuals play an important role in the strategic development of the companies we partner with.
To give an example of where tailored support and finance can be beneficial,at Lloyds we recognise that the manufacturing industry is an important part of the UK’s economic recovery, so we offer funding packages that are specially designed to support the sector. And we have experts within this industry who can offer guidance throughout the whole process. We know that for manufacturing businesses that have to invest large amounts of capital in machinery, hire purchase products allow the cost of a particular purchase to be spread over an agreed period of time, instead of having to make a large one-off payment.
Improving cash flow
We also know that unlocking cash to invest is something small firms can often find difficult. Primarily because most of the cash is either tied up in assets, or used to optimise working capital, which often leaves little going into growth plans.
With this in mind, banks like Lloyds have created a range of asset based lending facilities for firms looking for a quick cash injection, allowing them to borrow money against the value of their current assets.
Similarly late payments can often be the cause of cash flow issues, so to help buffer the effects of this, businesses may want to take advantage of an invoice discounting facility. This allows owners to borrow money against unpaid invoices to bridge the gap between payments and generate much needed working capital.
Supporting international growth
Finally, we believe that it’s vital SME business owners recognise the growth opportunities offered by trading internationally. It might not seem relevant to all businesses but in our view, lenders have a responsibility to champion those businesses that are looking to start trading overseas, to enable them to expand and target new markets.
For businesses looking to fulfil opportunities overseas it’s important, in addition to looking at the funding options available, to seek out further guidance that your bank may be able to provide. This would help support the different stages of your business during its international growth.
On the funding side, my team offers a range of facilities to help with orders and payments in the international market. These include facilities where if an order is received from an international buyer, we can provide the working capital to help produce and ship the goods, as well as advancing payments directly to the business – helping SMEs avoid delays in payment processing.
In addition to financial support, business owners can also get access to expert guidance through banks. This is particularly helpful for firms looking overseas, with our partnership with UK Trade and Investment. We also help with various other aspects of international trading, such as securing contacts for businesses in different countries, maintaining relationships with foreign banks and helping with currency issues.
We’ve just seen Small Business Advice Week draw to a close and want to ensure people are continuing to think about what else they want to achieve before the end of the year. Whatever your business’s situation, whether you are planning to invest in additional assets, increase export activity, or improve cash flow, you should explore the many different funding options out there and grab opportunities with both hands. Through this, we can cement firm foundations for a sustained and robust economic future.
Lloyds Bank Commercial Banking
- Lloyds Bank Commercial Banking provides comprehensive expert financial services to businesses of all sizes, from start-ups and small businesses to mid-sized businesses and multinational corporations.
- Maintaining a network of relationship teams across the UK, as well as internationally, Lloyds Bank Commercial Banking delivers the mix of local understanding and global expertise necessary to provide long-term support to its clients.
- Lloyds Bank Commercial Banking offers a broad range of finance beyond term lending and this spans import and export trade finance, structured and asset finance, securitisation facilities and capital market funding. Its product specialists provide bespoke financial services and solutions, including tailored cash management, international trade, treasury and risk management services.
Support for SMEs
- In 2014, Lloyds Bank Commercial Banking grew its net lending to SMEs by 5% year-on-year, or over £1 billion (net), and announced a further commitment to grow lending to SMEs by £1 billion (net) each year to 2017.
- Lloyds Bank Commercial Banking works with government to support small British businesses and offers competitively priced lending with support from the Funding for Lending Scheme.
- In 2014 the Bank helped more than 100,000 start ups get off the ground as part of its commitment to supporting British enterprise.
To see the latest SME factsheet please visit: http://www.lloydsbankinggroup.com/media/media-kit/sme-fact-sheet/