SMEs need expert help with their borrowing needs more than ever

In his latest blog, Jason Oakley explains how our recent SME Survey has found that a majority of firms say their existing business bank can’t always support their borrowing needs.

If you’re a small business owner it’s likely that you are highly skilled in the industry that you operate in, be it manufacturing, retail, transport or any of the hundreds of sectors that make up the UK economy.

There’s also a very good chance that you’ll have what we used to refer to as ‘a good head for business’. Today it might be more commonly known as an entrepreneurial spirit. That ability to take a good idea or industry knowledge and turn it into a successful business venture. Perhaps it’s grit and determination to succeed, a flair for marketing, or an intuitive understanding of your marketplace and your customers.

There’s a seemingly endless list of skills that SME owners either already have or acquire as they run their businesses, managing them through the tough times as well as the good. But there are also areas in which entrepreneurs can’t be expected to be experts, where they turn to trusted professionals for support, such as HR or legal issues, and of course finance.

Even the most skilled SME owners might need a guiding hand when they tackle the more complex areas of their business finances, such as their cashflow and borrowing needs. So when that happens, where does the SME business owner turn for help and guidance? Their own business bank?

That would be the most obvious and understandable choice, because after all that’s the institution managing their day-to-day banking needs. But unfortunately our latest Recognise SME Survey has found that an awful lot of companies don’t rely on their existing business bank to help them with facilities such as an overdraft, loan or a commercial mortgage.

Every quarter Recognise surveys the financial decision-makers of 500 small and medium sized firms. In the August wave, 14% of SMEs surveyed said their business bank was never able to support their borrowing needs, while 11% of firms said they always used an alternative lender rather than their bank for their borrowing needs.

While a third (33%) of firms we surveyed said their business bank was always able to support their borrowing needs, the same percentage (33%) admitted their main business bank was only able to help them with their borrowing needs some of the time.

This means that a majority of the SMEs we surveyed said they can’t always rely on their main business bank for vital support and guidance around cashflow or the funding of equipment, assets and property.

That doesn’t come as any real surprise to me, or I’m sure to the hundreds of thousands of small businesses out there struggling to get the financial help they need. Neither will it come as a shock to the advisers who spend their days working with ambitious SMEs, advising them about the best kind of lending to meet their needs and connecting them with business lenders that can help.

What our survey does show is that there is growing demand among SMEs for the kind of lending and support that Recognise Bank was created to provide.

I believe part of the reason why banks have been found wanting in our survey is because over the years they have tried to cut costs by reducing the number of skilled Relationship Managers out in the field. This means that instead of talking to a real person with an understanding of their business, industry sector and region, SME owners are forced to deal with call centres and tick box application forms that are often unsuitable for the nuanced and sometimes complex needs of growing SMEs.

That’s why we have focused on creating a bank based on real people building real relationships with advisers and businesses via a network of regional hubs. This means that our Relationship Managers on the ground have a good understanding of local business circumstances. Beyond that, we have also recruited Specialist Sector Heads with experience of industry sectors that are not well served by the mainstream banks, such as Professional Practice and the Medical Sector.

We’ve also invested in the latest technology, but that is designed to provide speed and efficiency to support our Relationship Managers, not to replace them.

Our latest SME survey shows that firms are feeling confident as we shake off the restrictions of COVID and are looking to invest in their business growth. You can read the survey findings here. What it also shows is that SMEs need more support than ever before from trusted partners – advisers and specialist lenders such as Recognise.

Now is the time to get out and speak to business owners, to understand their plans and ambitions, and offer them the guidance they need to overcome whatever challenges they face. Now is the time to help them thrive.