Three lenders reveal the methodology behind their funding decisions

Funding options for growing businesses are more varied than ever before – from traditional bank loans through to peer-to-peer lending. We asked three different lenders what they offer and what kind of businesses could benefit, writes Kim McAllister

The banker

Andrew Harrison – RBS Corporate and Commercial

We’re the bank for British business and we’re pretty much second to none. We have relationship managers all around the UK working with local businesses and they get to know them well and understand their local economies. They help them develop their strategic plan. The benefit we’ve got is that we can put together the products and services within the bank to suit the customers.

We’ve got pretty much everything our customer needs to grow. We’ve certainly got one of the largest, if not the largest, network of relationship managers. Some companies know what they want and perhaps they want something more quickly, so in those circumstances we’re opening up new ways of doing business. They can borrow up to £50,000 and apply for that online; if they meet the criteria they are approved there and then.

We’re launching some more innovative ways of doing business, new products like Esme loans and Rapid cash. This is a digital, flexible working-capital product that connects with accounting software to provide a dynamic credit limit of between £25,000 to £300,000.

We have this always-on digital experience, the bank is working on solutions in a way that has probably only been done by fintech companies before now. I think we give the best of both worlds. As a long-standing bank we have the scale plus we have the relationship managers. A lot of our customers like dealing with people. We’re competitive – if the business wants money long term or short term we look at their track record but we have a range of different options for different circumstances.

We leant £3 billion to Scottish business last year, we’re reaching a large part of the market. The opportunity for us is to understand when people want to borrow through digital channels. We’re really a broad church, we serve every type of business. We’re about backing people – people with really good business ideas, experience and a track record demonstrating borrowing and repaying. We want to know the purpose of the borrowing, their goals and ambitions and of course their ability to repay.

With regard to Brexit – RBS is very much open for business. We have an £8.2bn Brexit fund for SMEs to help them navigate the period.

The broker

Robert Perrie – ABL Business

ABL Business offers independent finance expertise to commercial businesses, principally around access to funding and structuring debt responsibly.

The customer is at the heart of everything we do. We help business owners – large and small – with finance solutions in areas like buying equipment or property, refinancing existing debt and cashflow.

We are independent of the banks and the funders. This means that our customers get a specialist and impartial view of the funding landscape and the options that are available to them.

For me, the main hurdle for businesses in UK finance currently is “flowchart” lending criteria. If a business is unable to tick the majority of boxes, many lenders operate a ‘computer says no’ stance. We strive to have the knowledge, professional contacts and experience so that we can navigate funding applications for commercial businesses.

One of the most harmful or dangerous aspects to most businesses, whatever industry, is cashflow. Unfortunately, lenders in the UK are currently unable to match the pace of change that society has had over the last ten years so there is a disparity between clients’ expectations and the decision-making process of funders.

I don’t think businesses are aware of all the options available. Most decision makers in my experience struggle if their incumbent bank is unable to support them. This is where a strong professional network is essential, whether that is their accountant, IFA or Commercial Finance Broker. It’s about being creative within the confines of doing the right thing. At the moment in the UK there are possibly thousands of lenders. We are constantly building relationships in the funding market – criteria and credit appetite can change quickly, so having the ability to pick up the phone to a lender and discuss a transaction quickly is key to saving customers time and unwanted expense.

The most common stumbling block at an SME level for me is not understanding their Business Credit Rating and the importance of this. Effectively, you are asking for debt and it is advisable to position your business at an optimal creditability level pre-application.

Most people do not appreciate this and they can get into all sorts of issues when applying for funding and being declined.

The crowdfunder

Darren Cairns – LendingCrowd

Small businesses from across Britain choose the LendingCrowd platform to fund their ambitions because of our straightforward application process, speed of decision-making and ability to provide funding more quickly than high street banks. Borrowers also mentioned our high standard of customer service in a survey we undertook last year, which indicated that businesses create an average of 2.6 jobs per LendingCrowd loan. This survey of Scottish SMEs also found that a quarter of respondents would have been “very unlikely” to obtain funding in our absence.

To be eligible to apply for a LendingCrowd loan, a business just needs to have been trading for at least two years and have an annual turnover of £100,000 or more. Borrowers can check their eligibility in just 60 seconds and apply in minutes. If in doubt, we always say to give us a call as we can point you in the right direction if we are unable to fund ourselves.

Scottish SMEs that have secured funding via our technology platform have rated our simple loan application, fast process and good customer service as determining factors in choosing us. Since we launched in late 2014, we have delivered more than 790 loans totalling over £70 million. As a result, we are one of only three Scottish companies included in the Deloitte Technology Fast 50 ranking of the UK’s fastest-growing tech businesses. Many borrowers also appreciate our local, friendly and helpful approach to doing business – we have actually increased our Business Development team across Scotland at a time when many banks have withdrawn such personal services.

We can arrange loans for every type of small business and for any business purpose, such as investing in new equipment or hiring more staff. We support the growth ambitions of businesses across Britain and see a significant opportunity to assist even more SMEs in Scotland, where the commercial finance market is dominated by three large banks. Frustration with the time taken to get decisions from the traditional banks helps to drive the popularity of our offering.

Coolin Sky, an operator of holiday accommodation on the Isle of Skye, used a LendingCrowd loan to expand its business by purchasing a bed and breakfast on the island. Director Eddie Tweedie said: “The loan went on the platform on a Friday morning and I was expecting to have an agreement around Monday afternoon. Come lunchtime on the Friday the loan had been funded. I’ve been doing mortgages since 2007 and I’ve never known speed like that. Absolutely first-class service.”

This article first appeared in The Scotsman’s winter 2019 edition of Vision. A digital version can be found here.