As the financial market moves ever further away from the bank monopoly it once was, SMEs face a bewildering choice of finance options. How should they decide who to work with, and what are the signs of a good provider?
Companies might not even know what they’re missing, or what a good finance provider should do. It’s often the case that he who holds the purse strings runs the show – so you do what your financier tells you to do. But that’s the wrong way round. Your finance should fit your goals; your goals shouldn’t mould to your finance provider’s whims. Successful companies need a personalised service.
That’s all very well, but if you stroll into your local bank branch and ask for an individualised business loan, regardless of company policy, you’re going to find the exit again very quickly – quite possibly with laughter ringing in your ears. The same goes for ‘faster’ services like invoice discounting. You don’t make the rules.
To an extent, that’s going to be the case across the board – finance providers have to make their money too, and there have to be safeguards in place. But there’s still room for a much more flexible and personal service. A service that helps SMEs grow, rather than giving them a series of hoops to jump through just to keep the lights on.
With that in mind, here’s what you should look for when picking a finance provider. It’s not asking the earth: hard-working businesses deserve to be treated as partners, not chancers.
- Face time:Make sure they treat you as an individual and spend time in your office getting to know you. You wouldn’t start a project with a new partner without getting to know them pretty well first, and the same should apply to finance. You stand a much better chance of getting funding that suits your company if your provider actually knows you from Adam.
- Trust: Do they require director guarantees, or will they get to know you and invest in you with an element of trust? SMEs rarely have the next three years sewn up. There’s always an educated gamble involved in growth – and sometimes you can’t prove on paper exactly how it’s going to happen. Does your finance provider have the savvy to examine your plans in depth and trust that sensible planning and strong leadership will turn up results? Will they still trust you if plans change?
- Give ‘n take: Is there room for debate or do you get a formulaic decision with no regard for individual circumstance? You need to be able to input on your deal, and have the chance to correct any aspects that are down to a misunderstanding about your business. They should be the experts when it comes to finance – but you’re the expert on your business. So both companies should work in tandem to develop the deal.
- Borrower experience: How have other borrowers found working with your provider? Check reviews to find out what kind of service levels they usually provide – particularly with regard to handling problems. Take reviews with a pinch of salt (there’s always someone willing to exhibit the chips on their shoulder), but if a company routinely gets hauled over the coals, it’s probably best to keep looking.
- Flexibility: How willing are they to extend or increase your loan? SME business is quick-paced and often opportunistic, and you need finance that can keep pace. Will they work to a timescale that suits you, or are you risking red-tape limbo?
Don’t be afraid to push for the best – and recognise that that might not come in the form of a household name. Bold SMEs need flexibility, personal service and the right to evolve in the face of new opportunities and challenges. Don’t make your finance an anchor: find the right provider.