Finance challenge for SME’s

Financing small businesses growth was the hot topic at a recent gathering of the region’s leading finance providers and business intermediaries.

The Finance Yorkshire event, brought together a wide range of organisations tasked with providing business finance and support to businesses across South Yorkshire.

The meeting, provided an opportunity for Finance Yorkshire to meet with intermediaries and fellow finance providers to gain valuable feedback and to discuss how businesses are finding access to funding.

Tony Parsons, Finance Yorkshire Director led the roundtable discussion which covered some key topics.

Taking part in the discussion were;

Andrew Hulse, UHY Wingfield Slater, Andy Chaffer, Connect Yorkshire, Andy Cocker, Bank of Scotland, Andy Lowther, NatWest, Ben Hendry, Nabarro, Claire Davis, Grant Thornton, Craig Williams, Santander, Darren Marshall, RBS, Don Gray, BHP,John Franklin, Co-operative Bank, John Longstaff, BHP, Julie Bowler, HSBC, Kevin Cunningham, Irwin Mitchell, Kevin Gregory, Hawsons, Lee Bloodworth, HSBC, Martyn Weatherall, Hawsons, Paul King, Hill Dickinson, Patrick Abel, PKF, Peter Garnham, Business Transformation Team, Russell Fitzpatrick, Yorkshire Bank, Steve Bell, Hart Shaw, Tom Rumboll, Lloyds TSB

• Has Finance Yorkshire filled the funding gap for SME’s?

Patrick Abel, PKF
The restrictions Finance Yorkshire has around funding around MBO’s and MBI’s has meant that there still a gap in this market which Finance Yorkshire has not filled.

Alex McWhirter, Finance Yorkshire
Yes, there are restrictions but we can structure a deal where we provide the development capital, that is we come in at the back end and fund the growth.

Ash Chopra, Finance Yorkshire
We need to innovate and yes, we can be creative. In the first equity deal completed S3 ID based in Rotherham, Finance Yorkshire provided the development capital.

John Longstaff, BHP
There is nervousness in the economy and this is leading to lack of appetite for development capital deals.

Peter Garnham, Business Transformation Team
It is difficult for Finance Yorkshire because of the reluctance for companies to do deals, due to lack of confidence. There is a perception that Finance Yorkshire takes a similar approach to banks on risk.

Tony Goulbourn, Finance Yorkshire
Yes, we are a ‘risk fund’. The challenge is to define and communicate this effectively. The differentiation between the banks and Finance Yorkshire needs to be communicated and understood. We do try to do this but it is a difficult message to communicate at a general level to small businesses with different needs.

• Does Finance Yorkshire need to review its marketing and PR strategy?

Andy Chaffer, Connect
Accessibility is very important and Finance Yorkshire should consider on-line applications with very quick response times for amounts say under £30k.

Tony Goulbourn, Finance Yorkshire
Yes, I agree. There is a resistance within the sector and the traditional view that you ‘need to look people in the eye’ needs to be challenged, but it is something we should consider.

Andy Chaffer, Connect Yorkshire
An online application form would be a great way of spreading the reach of Finance Yorkshire to new companies that have not applied before and do not work with an adviser.

Peter Garnham
Finance Yorkshire has said that the majority of equity deals come direct, you should therefore consider for equity investments that it is the deals that are going through the financial intermediaries that you are not seeing.

Ben Hendry, Nabarro
This may be because companies are not using advisers as readily as previously.

Martyn Weatherall, Hawsons
Finance Yorkshire has had some good press coverage lately and this should help to stimulate applications.

• Who thinks Finance Yorkshire is proactive in the market?

Patrick Abel, PKF
There is a need for more contact so we have the full picture on equity linked finance.

Don Gray, BHP
In terms of market share my view would be that Finance Yorkshire has captured a majority of the opportunities that fall with their criteria.

Darren Marshall, RBS
We meet with Karl Hodson from the business loans team every two months and we review the work in progress and look for the deals where we can work together. This works well.

Andy Cocker
Some bankers do try to include Finance Yorkshire into a deal, but other banks do not.

Tony Goulbourn, Finance Yorkshire
Our main tactic is to build the relationships with the banks. This needs a cross Finance Yorkshire approach.

Andy Chaffer, Connect Yorkshire
Yes, South Yorkshire Investment Fund did this and over time it worked.

Don Gray, BHP
As an advisory firm we are well aware of what Finance Yorkshire offers and would like to think that we are quickly able to spot opportunites and connect with the right people at Finance Yorkshire. It may be that beyond the advisory community there is less awareness of what assistance is available and one way to address this would be for a more pro-active approach direct with potential investee companies. However this type of engagement takes time and require resource.

• Is it difficult for SME’s to get credit?

Peter Garnham, Business Transformation Team
I am dealing with a number of SME’s and yes it is very difficult for them to get credit. Banks say credit is available but it is a very difficult process and companies think that it is not worth it.

Darren Marshall, RBS
Companies think that the banks will say ‘no’ and are therefore hesitant. It is crucial that we confirm an appetite to assist where we can to eliminate this view. It is of course important that businesses talk to us and that we continue to build relationships with both our clients and the wider business community.

• What is Finance Yorkshire not doing right or needs to change?

Andrew Hulse, UHY Wingfield Slater
You need to consider what happens to the companies that you reject?

Tony Goulbourn, Finance Yorkshire
We used to refer them to Business Link Yorkshire, who provided an important conduit – this is no longer an option. Currently we refer declined businesses to Connect Yorkshire or to another funder for example Donbac or UKSE if they are based in this area.

Ash Chopra, Finance Yorkshire
Yes, it depends on the individual circumstances. We have referred companies to advisers or to Connect Yorkshire if appropriate.

Tony Goulbourn, Finance Yorkshire
It is difficult, because many small businesses are not really interested in talking to the corporate financiers, because of fears of cost.. It would be good to have some support available to help these companies and we have been having conversations around this at Finance Yorkshire.

Tony Parsons, closed the event by adding; “‘Finance Yorkshire has made 127 investments to date and for the vast majority of these we have been part of a wider funding package working alongside the bank or other lenders.

Packaging of deals especially with the banks is key to the success of Finance Yorkshire and we need to work closely with the South Yorkshire business community to help their clients raise the finance they need.”

For more information about Finance Yorkshire, please visit www.finance-yorkshire.com or ring 0845 649 0000.

Note: this news article is from Finance Yorkshire’s previous fund. Read more about Finance Yorkshire