SMEs are living in interesting times at the moment, and the next few years are shaping up to be even more unpredictable.
The months we are living through now may appear fairly benign with hindsight. There are strong economic and political headwinds developing against business – or is it more that there is a world of opportunity about to open up?
Whatever your view, this will be reflected in your business through the decisions you take now.
Do you wait and see, or actively exploit the opportunities that might open up? Or
Do you adopt a defensive position in case those headwinds blow the wrong way?
Banks and other mainstream lenders dislike uncertainty. It makes them more cautious lenders.
For most SMEs this means availability of finance from these sources will not grow over the coming years, and may even contract further.
Just because a bank says no does not mean that your proposal is necessarily bad – it just means that it’s not within their current lending parameters.
Fortunately, there is another solution. Peer-to-Peer lending has grown exponentially over the last few years and is now a mature and thriving market to source loans for SMEs.
So, to give an example, we are seeing more businesses come up for sale at the moment. Financing the acquisition of a competitor or an MBO – management buyout – is something the P2P sector is becoming very good at, as the banks increasingly see this as outside their scope.
In contrast, now is also a good time to put in place a defensive funding strategy that will get your business through the next few years - do your sums and get your finance arranged now if you think you’re going to need to weather the storm.
P2P funding has become more applicable to SMEs who are looking for greater flexibility than traditional funding. At present, there is lots of cash waiting to be lent out to UK businesses. In turbulent times, one of the things that will not be uncertain is access to finance.