Small Business Finance

Small Business Finance/ Banks Not Lending

This whole subject of the Banks not lending to small firms has been all over the news in the past couple weeks and it’s clear there are some issues of lending to small firms, but that is not the whole story.

You may have noticed the Federation of Small Business, Chamber of Commerce, the Labour Party, Daily Mail have all been quick to demand that  the Banks lend more, and not one of them provides a solution just a rant.

We have known all of this for at least 3 years and this situation is going to continue for at least another 3-5 years if not longer. FACT!

Over the past couple of years we have been able to help a number of start-ups and small firms with mentoring and finance, partially from our own sources and few from our ‘angel investor’ contacts. We provide solutions in many ways, there is money available honestly. The key is, that is not the problem.

If any of  you have watched the Dragons Den on the BBC you would have noticed that most of the businesses that appear on there have a reasonable idea, know roughly how they want to spend the money attracted and realise that the Dragon Investors bring far more to the table than money.

Contacts, understanding of marketing, an understanding of process, buying, managing staff and a whole lot more.

Most of the business owners we meet have spent money and time on Websites, Logo’s, Brand Creation, Telephone Systems and important decisions on office chairs and pot plants, colour of business cards. They then wonder why the Bank is not interested in lending.

We can give you an internet presence less than $100, logos (from $20 each) it might not be perfect but it will be better than that produced by most Website designers. We also provide a money back guarantee for use at any point (sorry this was not meant to  be a pitch).

Banks make their money by lending money to the likes of you and me at interest rates higher than they pay to their depositors. They want to lend, its the business they are in.

The Dragons also want to lend money, or buy into a business however you often see a half-witted idea (great entertainment value only) and it’s ill thought out, a stupid idea poorly executed.

How many times do you note that there is often a poor understanding of basic finance, profit is what you have when take the sale price of an item and deduct all of the costs, manufacture and sales. If you can’t work this out you don’t have a business, really.

No amount of money will be coming to save you or can save you, and the banks, Dragons a.n other investor all spot this quickly and of course not lend money to your start-up.

So this is what you need to do:

  • Take a long hard look at your business idea.
  • Do some research, who are your competition? How much do they charge for similar products/services? Can you compete?
  • What are you going to do differently? Write it out, test it, research it and then prepare a 2 line sentence explaining it.
  • Do some market research, ask some potential customers, note that often they will say, “great idea” and then not spend money on it. Customers are like that, make sure you do the research correctly
  • Don’t compete on price for a product, can a Supermarket sell it cheaper, if not now they will when you start selling it. If you are competing on price for a service, you are doomed before you start.
  • Consider carefully where your business will stand out/do differently and be profitable (if all you get out of your business is a salary, then it’s a job with flexibility not a business).

Once you have done all of the above and put it together in a cohesive plan, then take it to the Bank and I know you will get a different hearing (bearing in mind all of the people you meet in Banks have jobs, not really the sort of person you should consider taking business advice from) but as you only want to borrow money be nice.

If it fails at the bank, speak to me or one of my partners and we will certainly help either with some funding/some help/or both.

There has never been a better/easier time to start a business and the banks are there to filter out the rubbish, however most Bank Staff could not spot ‘a diamond in the rough from 6 inches’ and most prospective business owners don’t prepare enough or properly which makes it safe for everyone to not lend.

For those of you that are genuine, and really want to get this right, now is really the best time in a long while, everyone is whining, bitching and not making the most of what is in front of them. Opportunity, which is a massive shame.


Richard Smith
PS For business owners who don’t want to buy into the gloom there are some solutions you can call me on 01323 660058 to discuss.

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