Having a great product or service is not enough — small businesses must be able to tap into ready capital in order to get off the ground, or once established, keep things humming. PYMNTS caught up with Conrad Ford, CEO and founder of Funding Options, a credit broker, to discuss the challenges facing small businesses in the U.K. as they seek funding, and especially as a tax deadline looms this month.
July 31 is the deadline for U.K. small businesses paying self-assessment tax. This is a major crunch to their cash flow. What is a small business to do to find the funding needed to meet their tax obligations?
CF: Whether it’s because of unexpected trading, or simply poor financial planning, small firms will often need funding very quickly for situations like pending tax liabilities. The alternative finance market is growing fast, with dozens of products available to suit individual circumstances.
What we do is all about matching the financial needs of small businesses with lenders’ criteria, and we find the majority of companies are financeable one way or another.
For example, a startup might not have a long enough trading history for an unsecured loan, but if they raise large invoices, or are asset-rich, it’s usually straightforward to find a lender prepared to fund them. There’s a variety of business funding choices out there that didn’t necessarily exist 10, or even five, years ago.
To what would you attribute the surge in demand for funding to cover tax bills, and what options are available in the market today?
CF: I’d say it’s a combination of a few factors — the most obvious being that we’re still recovering from a recession. Running a small business is never easy (I know that as well as anyone!), and the politicians have been saying for a long time now that SMEs were the hardest hit in the mid- to late-2000s.
Another symptom of recession is the current reluctance of the major banks to take risks, and we’ve seen their levels of lending to SMEs drop by billions of pounds — one effect of a cookie-cutter lending approach that many small businesses struggle to fit into. That means there’s many, many more businesses seeking finance, and many of them are almost automatically turned away from the mainstream providers. There really is an array of choices in the alternative finance market. It’s possible to find lending using assets, invoices, card terminal payments, crowdfunding, or even your personal pension.
What Web technology do you use to scan the market to find the best available options to ensure your clients find the right finance option?
CF: We use our own proprietary infrastructure, which shares some technology DNA with what you might find powering an online dating site. Both customers and lenders are looking for very specific things, so we work both with major banks through to over 50 alternative lenders. With dozens of questions, and dozens of parameters in each, the number of possible variations through our platform is approaching infinity, so sophisticated technology enables us to be as specific as our customers’ needs are.
What differentiates Funding Options from similar service lenders? What makes you unique?
CF: Funding Options isn’t a lender — we’re an online credit broker that helps lenders and small firms find each other. The amount of choice in alternative finance is simply bewildering for a typical SME.
On the one hand, small business owners are typically generalists rather than experts in finance, and on the other they’re also incredibly busy, often working more than 60 hours per week. This doesn’t lend itself to navigating the small business finance market, where here in the U.K. there are hundreds of alternative finance providers, with a level of diversity perhaps second only to the much larger U.S. market.
Our online finance finder is a sophisticated aggregator that enables small business owners to fill out an online form in minutes, and immediately find out which lenders are a good match. More complex cases are then passed on to our team of business finance specialists who are all experienced in their particular fields, whether that’s invoice finance, property development or peer-to-peer lending.
Many of our competitors rely heavily on either traditional customer advisors (i.e. human beings), or pure technology. Our combination of technology and human customer service means the businesses that come to us have a much better chance of finding the finance that they desperately need. In short, we can match almost any U.K. small business to almost any alternative lender — accurately, quickly, with no obligation and for free.