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In a recent study by the Institute of Directors (IoD) is was found that 1 in 4 UK businesses have tried to access finance via their banks. Unfortunately almost 60% of those businesses had their applications rejected. What was more worrying was that 83% of those businesses has received no information regarding the available alternatives.

The banks should be offering the government’s Enterprise Finance Guarantee Scheme (EFG) whereby the government guarantee 75% of the facility thus limiting the banks exposure to 25%. There is an argument as to why the banks would lend 25% against a project or to a business that they didn’t believe in but it does at least limit their exposure. They should at least be promoting this facility but it seems to face the same issued that the SFLGS did in terms of lack of acceptance by the banks.

On that basis it is interesting to see invoice finance providers bolstering their offerings with the EFG scheme. I am not sure how active they are in lending but I have seen a fair amount of PR relating to invoice finance providers offering the EFG which is more than can be said of the banks.

But realistically what are the finance options outside the banks?

Well beyond the banks asset finance arms who offer finance against real business assets. They tend to avoid softer assets such as IT and office furniture but will happily consider plant and machinery along with vehicles. Just because you bank has said no to asset finance other options do exist.

The same can be said with invoice finance. The bank invoice finance arms are the most risk averse. As such, just because you have been told ‘no’ does not mean there is not a suitable facility out there for you. The independent invoice finance market can deal with most scenarios.

The commercial mortgage market is severely subdued and lacks alternatives outside the banks. Roughly 2 years ago a dozen or so lenders withdrew from the market literally overnight and that vacuum remains to be filled.

I think businesses need to be flexible in their approach to sourcing finance and maximise the security that sits within the business. That means seeking specialist forms of finance from specialised providers. If your bank can offer 80% against your debtors can an independent specialist invoice discounting provider offer more? The same applies to asset finance and commercial mortgages – shop around and maximise the amount of finance you can generate.

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