Open House Global speaker Niels Turfboer discusses businesses' attitudes towards external finance.

A recent stat from the British Business Bank (BBB) reveals that over 70% of firms say they would rather forgo growth than take on external finance.

Behind this eye-raising finding is an important question—how could this be? Does it relate to a lack of the right options, a process that is too difficult and time consuming, or is there more to the story?

The Availability-Awareness Disconnect

Let’s start by exploring supply.

There are over 400 lenders operating in the UK—asset-backed, unsecured, crowd funders and peer-to-peer, to mention a few. In recent years access to capital, innovative minds, and government support, have brought new finance options to the market while raising the bar for existing ones. These lenders provide a wide range of choice when it comes to duration, as well as for the actual underwriting of the capital they are providing—cashflow, assets, invoices, etc. The long of the short of it is that there should be something for everyone.

When examining this alongside the BBB stat, what becomes clear is that there is a disconnect between the many options available and the awareness of those options. To ensure that businesses across the UK can achieve their growth potential and contribute to the country’s economic future, this needs to be addressed.

The Importance of Local Networks

Fortunately, government, lenders, and industry associations have all identified this disconnect. With a sense of urgency, they are working to address it. In recent years online resources have been released, campaigns have been launched and events have been organised with the explicit aim of making UK businesses aware of the choices available to them.

Personally, I have seen firsthand the value of getting local networks involved to complement what is happening at a national scale.  Anyone in business will know that despite living in an online world one’s peer-network and local business community often becomes a sounding board. While businesses don’t always speak openly about their financial decisions, we have seen that in certain circumstances to certain peers, in particular ones that find themselves in similar situations, businesses are open to sharing their approach and solution.

As a result, businesses who might have forgone growth based on the assumption that there wasn’t an option available for them, instead end up having conversations with us. I am a staunch believer in the power of local networks to raise awareness of the many financing choices available today. Ultimately this will greatly benefit regional business hubs across the country be it in East London, Bristol, Cambridge or Manchester. 

It’s Not a One-Stop Shop Anymore

In addition to addressing the fallacy that finding finance is difficult with a lack of options, I believe it’s also important to address the misconception that you can have only one finance partner. One of the biggest changes in the last 20 years is that there aren’t any one-stop shops anymore. You can’t go to your bank for all your finance needs. Instead, to achieve cost efficient growth, you need a funding mix mentality. Businesses need to engage in a continuous re-evaluation of their funding sources and seek out multiple providers to put in place different deals for different needs. Finding the right mix can require more time and resources, but with a strong accountant or business adviser and support from one’s local network, it is a worthwhile investment for long-term sustainable growth. And as we all know that is the ultimate prize for any business owner.

About the author

Niels Turfboer is a speaker at IOD’s Open House on the Road Series. He is the UK Managing Director for business lender Spotcap

Open House on the road