09/07/2010

By Alex Evans, Editorial Director, National Business Awards

A panel of finance and investment specialists at the final Growth Summit organised by the National Business Awards turned the tables on an audience of 150 plus SMEs (Small and Medium Enterprises) to ask why they deserved funding.

Credit ‘is not a right’

As various SMEs and start-ups in the audience recounted their struggles to convince lenders about their business plans, Damian Reece, Head of Business at Telegraph Media Group, stressed that ‘business needed to remember that credit isn’t a right’. “We have come out of a long period of irresponsible lending but there was a lot of irresponsible borrowing as well,” he warned, adding that lending targets for banks were not just unrealistic but not responsive to the current needs of business.

Qualifying this last point, Colin Stanbridge, CEO of the London Chamber of Commerce, said business had become more cautious by actively reducing its debt burden. “Research from 4 months ago found that 50% of SMEs surveyed don’t borrow and, of the remaining 50%, only 15% borrow from banks,” he explained. “Most businesses are getting rid of debt and hunkering down. They’re not investing in anything new like people or technology.”

Gary Coombes, Head of Business Sales for SMEs at Orange UK, observed that his clients had become more resourceful in more challenging times. SMEs are less adventurous in terms of lending but they are becoming more creative with existing tools and technologies,” he said. “Mobile telecoms are helping to liberate workers from the office, make them more mobile, more efficient and better informed. Lower overheads mean they need to borrow less.”

Funding growth

For those hoping to fund ambitious growth plans, host and broadcast journalist John Stapleton asked the panel’s finance specialists which type of business were most likely to qualify for funding.

“We have to look beyond forecasts and projections to what will drive growth and mitigate risk,” said Steve King, Regional Head of Corporate Finance at Santander, who claimed an increase in business lending compared to last year. “Regardless of sector, we invest in good businesses which have good management, maturity of vision, and a clear idea of costs and how they will service their loan.”

Representing one of the few private equity companies to have done a deal in the last year, 3i’s Director, Growth Capital Business, Gordon Hague, said its aim was to make good companies great. “We want businesses with secure cash flows, proven strategies, and an understanding of where it sits in its market and who its customer is,” he said.

Julie Meyer, CEO of business angel Ariadne Capital, confirmed that it had invested £2.9m in 5 businesses in the first six months of 2010 — but the days of investing large sums in one company had gone. “Today’s winners are those who understand their eco-system, like music entrepreneurs who are cutting their customers in, or Monetise where it cuts its operators in to make the model work.”

Persistence pays

For those with clear strategies, good management, and an understanding of their market, but still unable to secure finance for growth, Meyer urged them to explore opportunities in the UK’s growing private debt industry - whether it’s business angels or friends and family. “The result of banks not moving fast enough is the emergence of a new and more innovative financial services system,” she said. “Look at Fredericks Foundation, a micro-finance organisation in the UK that no-one has heard of — yet. There are lots of options out there for determined entrepreneurs.”

Concluding with some harsh realities about today’s economy to one SME bemoaning the lack of bank lending, Meyer added: “You are in competition with lots of other start-ups and SMEs, so you need to get out there and set yourself apart. Network, and get yourself noticed. Get used to idea that you can’t change the lending environment or the economy so adapt your business to make it successful. You need resilience and optimism. The CEO of Monitise had 192 fruitless meetings before the one that got him the funding he needed. If it’s worth it, stick at it; but if you don’t think it’s worth it, get a job.”

To find out more about the National Business Awards 2010 visit www.nationalbusinessawards.co.uk

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