MARKET 04/2016

Alternative

business finance

market overview

Agenda

Strong economy, but uncertainty ahead

The general state of business lending

Alternative funding options for firms

In many ways, UK economy in fine shape

2008

credit

crunch

Today

UK employment, millions

Sources: ONS, Gov.uk, Telegraph

“The UK has its highest

ever employment rate

of 74%”

“Britain is now forecast

to be the fastest-growing

country in the G7”

But huge uncertainty ahead

“Bellwether for the

global economy

has crashed to its

lowest level ever”

“Ships are being

scrapped at

double the 1986

record rate”

Deja Vu? Across the pond Closer to home

Bank lending to firms collapsed over the

last few years; it’s now finally stabilising

fall in lending

to UK firms

£10 billion

Sadly for the economy, many faster-

growing sectors are the worst hit

Traditional sectors High-growth sectorsAssets

The hidden story is that overdrafts

are still collapsing; this won’t change

“A report from Funding Options, the

online business finance supermarket,

has said the overdraft cull shows no

signs of abating”

“Twice as many SMEs in the North of

England have had their overdraft

facilities axed.. says business financial

comparison site Funding Options”

This is a huge issue, because working

capital drives most SME finance needs

The business need

Source: BIS

“Giving a small

business an overdraft

is like handing a

child a loaded gun”

said a leading

business banker”

The bank view(!)

So why don’t firms just go elsewhere?

usage levels of

alternative finance

10%~20%

30%~40%firms using personal

credit cards

Dozens of finance

products, hundreds

of finance providers

“56% of SMEs unfamiliar with any

forms of alternative finance”

Sources: Cambridge University, AXA, FT

Alternatives to overdrafts

• Good if

you can

get

them

• Unattra

ctive for

banks

Invoice finance

• Factoring or discounting

• Unregulated market

Non-bank overdrafts

• New types of overdrafts

• Proactive monitoring

Business credit cards

• Tough qualifying criteria

• Limited scale of funds

Invoice finance a staple

for many B2B sectors;

key considerations are

cost versus flexibility

Emergency or top-up funding

Short-term loans

• Terms of a few months

• Up to a month’s revenue

Sell an invoice

• Single large invoices

• Even purchase orders

Dozens of short-term

lenders, with diverse

criteria; challenge is

knowing where to look

Revenue advances

• Pay as a % of revenue

• Fixed cost of finance

Longer-term growth facilities

Term loans

• Typically 2-4 year terms

• Traditional underwriting

Structured bank loans

• Drawdown on milestones

• Focused on growth firms

Biggest challenge for

many firms is they lack

physical security, in

often cyclical sectors.

Structured direct loans

• Bespoke & low volume

• Warrants popular

Thinking outside the box to get growth

finance: some recent case studies

Replaced bank with

flexible invoice finance.

Unlocked personal

pension for growth.

Executive search,

doubling turnover

Replaced bank with

flexible invoice finance.

Fast short-term loan

over Christmas.

Midlands regional,

£2m-£3m turnover

Nationwide £5m+

high-growth turnover

Kept existing bank

invoice finance.

Took unsecured

~£200k term loan.

Need finance? Have a go: fundingoptions.com

“Professional,

straightforward, fast, friendly”

“Helpful, speedy

and respectful”

Thanks & questions

CUSTOMERSEXPERTS

“Helpful,

speedy and

respectful”

“Help SMEs to

get the finance

they need”

PRESS

“The online

business finance

supermarket”

GOVERNMENT

“Hundreds of jobs

either saved or

created”

@FundingOptionsFundingOptions.com