The World of Commercial Finance has seen a great number of changes over recent years. We have seen a proliferation of types, and providers, of commercial finance. For example: Equity crowdfunding, unsecured loan-based crowdfunding, rewards-based crowdfunding, spot factoring, merchant cash advances, pension-led funding, Government start-up loans. These are all types of funding that have grown significantly in terms of availability over the last 10 years to provide what can be a confusing set of financial strands.
The British Business Bank [BBB]
This was created in 2014. The aim was to take on all financial schemes previously controlled by Capital for Enterprise Ltd. This included the Enterprise Capital Funds, the Enterprise Finance Guarantee, Business Angel Co-Investment Funds and the Small Firms Loans Guarantee. This has, also, impacted on the funding landscape.
The BBB does not, however, lend to SMEs directly. Instead they work through ‘distribution partners’ i.e. other financial institutions, to increase access to funding principally by providing part guarantees for loans. The BBB was responsible for accrediting all lenders for approval on, for example, the Coronavirus Business Interruption Loan Scheme [CBILS] and the Bounce Back Loan Scheme [BBLS]. This included setting out the rules under which those accredited lenders could provide funding and be protected with the appropriate Government guarantees.
Well over 100 funders were approved to provide either one or both of CBILS and BBLS. These funders included high street banks, challenger banks, fintechs, asset finance companies, invoice finance companies, crowdfunding platforms and local regional not-for-profit organisations, to name a few.
No ‘One size fits All’
It is important to bear in mind that there is no ‘One size fits all’ when it comes to raising finance for an SME. The same applies to start-ups. A number of the lenders who were accredited during Covid will support start-ups from their normal product range although some will not.
Fintech Funders.
We have mentioned the relatively recent arrival on the scene of fintech companies. These are companies that offer financial services or applications that rely heavily on technology. Fintech companies are often industry disruptors. They use technology to change how consumers interact with the financial industry. Indeed Fintech is now categorised by most as its own ‘Industry’. The industry has certainly seen impressive growth over the past few years. In America alone, the number of fintech startups increased from 5,868 in 2018 to 11,651 in 2023, a trend that has continued. By way of comparison the number in the UK was c.1600 in the same period.
Thus, whilst the number of potential suppliers of commercial finance has expanded considerably over recent years, this raises further questions:
- What type of finance suits my business best?
- Should we consider using more than one type of finance?
- Which Funder(s) suit us best?
Don’t hesitate to ask for advice.
This is where the experience and guidance from BFS can save the business manager both time, money and, in many cases, heartache! If you would like to know more about the commercial finance options available to your business simply call us on 01327 349 779 or e-mail enquiries@bufinserv.co.uk and request a free consultation. Alternatively complete our enquiry form and we will be happy to see how we can help you.