Unlocking alternative finance options to support growth

10th December 2021

Blake Morgan Banking and Finance Partner, Meera Jansen hosted experts Susan Elliott, Senior Manager from the British Business Bank and Deepesh Thakrar, Senior Director at OakNorth Bank, in an insightful FD Connect online event about alternative finance options. The session covered how the British Business Bank and OakNorth Bank are supporting businesses, particularly in scale-up and growth mode, to bridge the gap between where the money is and where the opportunities are.

A challenging time for business generally

We know that businesses are facing considerable challenges. Deepesh acknowledged that there has been and will be a need for businesses to have capacity and the funds needed to hold their own over the coming years. The pandemic and Brexit will continue to test businesses adaptability to succeed, alongside inflationary pressures such as utilities, fuel costs and insurance, as well as wider issues around lack of talent and supply chain disruption.

OakNorth Bank take a very personal, focused approach to approving funding applications. They look for “realistic and achievable forecasts – and outline the key stress tests against anticipated pressures in that forecast.” In particular, they look beyond pure financials. For business leaders looking for alternative finance, debt finance in Deepesh’s specialism, they meet face to face with the credit committee and have the chance to give background and ‘colour’ to what that business is looking to achieve. Giving them the best chance for approval. During 2020, OakNorth lent over £1.1bn to British Businesses and have strong growth ahead.

Businesses have to look ahead and account for likely pressures in advance to better support their case for alternative funding.

For businesses that have survived the pandemic, growth is now high on the agenda, and how they fund that growth is key. Sue highlights that “although there is a large amount of finance available, it is often focused on London businesses, with far less support available for regional and rural businesses.” As reported in The British Business Bank’s recent Regional and Nations Tracker Report, gaps in finance lead to wasted economic potential, it is important to understand the geographic factors behind those gaps.

What can businesses do to support their funding application?

When asked what companies can do when applying for funding to support their case, our experts echoed similar points, in that they are looking for businesses to account for pressures in advance.

Depeesh considered that “stress testing of financials and various cost margins were a big part of the underwriting process for OakNorth Bank. They look to ensure that the business is well equipped to deal with challenges in the future and that there are measures in place.”

A key part of future planning and resilience is the path to net zero and sustainability going forward. Environment, Social and Governance issues are never far from the agenda and with BCorp organisations balancing profit with purpose, the market has an ever more interesting outlook. Finance is a significant part of this discussion, with all organisations looking at the impact of legislative changes out of COP26, alongside their own corporate responsibility agendas more closely. Does this impact how businesses can secure additional finance?

The British Business Bank is dedicated to help make finance markets work better for smaller businesses. A key objective is to support the transition to net zero and how smaller businesses can access the right funding to achieve this. It is important that business leaders understand the finance options available and identify potential sources of finance that may suit a business better than others.

Interestingly, Sue picked up on how investments may change because of this. Speaking on this issue, Sue said that “some of the bank’s solutions going out through the guarantees and investment programmes may change over the coming year.”

Levels of external funding at an all-time high

Currently, levels of external funding to SMEs is at a 10 year high. The British Business Bank’s SME Finance Report showing that at the end of Q2 2021 45%) of SMEs were using external funding. Sue said that “looking at trends over the last 10 years or so where the lowest point dropped to about 30%, these high levels are looking to persist, not just because of the down turn many are experiencing, but importantly to ensure businesses are able to capitalise on opportunities for growth.”

Our experts agreed that there is a need for improvement in skillset and awareness within financial leaders in SME organisations generally. But, organisations such as the British Business Bank and OakNorth Bank can be key advisors to support businesses assess the range of alternative finance options available.

If you’d like to join FD Connect, Blake Morgan’s dedicated forum for finance directors, CFOs and other senior finance leaders, you can join for free here.

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