Reflections on the changing funding world


Some onlookers thought that 2015 would be the year when we might be able to move on from the fallout of the financial crisis, with UK banks finally forgiven for their past misdemeanours. There were positive murmurs from the Government and a clear desire to get on with the vital work of restoring trust and confidence in the financial services sector.

Indeed, in his June Mansion House speech, Chancellor George Osborne spoke about the UK financial services industry’s capacity to be the best in the world, with “more competition, more innovation and more players in retail markets.”

The industry expected an end to the loathed bank levy as a result, but surprisingly Mr Osborne levied a new surcharge of 8%, applicable to all banks and building societies, including ‘challenger’ banks, which he previously appeared to embrace.

Defending this seeming U-turn, the Chancellor said “the banking sector has to put something back into the economy, so there will be no changes to the tax surcharge this fiscal year.”

It seemed that all was neither forgiven nor forgotten.

This ongoing stasis in relations with the banks is regrettable mostly because of the unintended consequences of legislation and regulation. The sad truth is that the weight of a tightened regulatory burden falls on the shoulders of UK businesses – the very organisations the Chancellor is hoping will power us on to continued economic growth.

With European and global regulation forcing banks to meet ever-higher capital and liquidity requirements, banks are increasingly unable to lend to businesses. This is even more severe in the case of SMEs and start-ups, who are considered high-risk. As the banks move to shrink their balance sheets, they are also largely exiting many forms of business lending.

It simply doesn’t make financial sense anymore for the banks to lend to businesses.

An even hand

As the head of a large independently owned financier, many may think that this is welcome news to me. But the reality is that – in a business’s funding tool-kit – there is a place for traditional forms of lending, in addition to non-bank forms of funding.

From overdrafts to invoice finance, leasing to bank loans, the market needs a full range of offerings to meet small businesses’ needs.

At present, however, the current media landscape portrays SMEs as having an ‘either or’ option. Either secure funding from a bank or peer-to-peer (P2P) lenders. But there are other avenues for businesses.

You would expect me to highlight invoice finance, but leasing and asset based lending are two other viable forms of business funding.

If SMEs rush to P2P lenders, in place of more established forms of funding, they are putting their faith in – as yet – unproven and untested players that only offer funding pure and simple, without value added services, such as sales ledger management, credit control or payment collection.

A recent Evening Standard article discussed rumours of a looming P2P lending failure and it is my belief that the Chancellor must be even-handed in highlighting risk within the financial system. This includes extending appropriate warnings about newer forms of finance to both SMEs searching for funding and investors looking for returns.

The Chancellor should also remember that the UK has a significant tradition of independent asset based financiers. At any one time such funders provide £19.3 billion in to businesses and this significant contribution to employment, growth and output must not be taken for granted.

Funding Scotland’s thriving SME sector


The small and medium sized enterprise sector in Scotland continues to go from strength-to-strength and our own research shows that well over half (61 per cent) expected sales growth in the three months leading to October.

It’s vital that growth aspirations are coupled with the financial means to fulfil orders, invest in technology and develop new business. This is where funding types, such as invoice finance and leasing can help a growing business. But there is still a lack of awareness of non-traditional forms of finance, which prevents many viable SMEs from taking the next step towards growth.

Financing business aspirations

Since opening our doors in Scotland 1999 Bibby Financial Services has supported hundreds of businesses through our offices in Edinburgh and Glasgow, but we still feel there’s more to be done to spread the word.

In the midst of the independence debate in September, we held events in Glasgow and Aberdeen, where we were joined by world-record breaking adventurer Mark Beaumont and journalist and BBC broadcaster, Andrew Neil.

Our events are a great opportunity for us to engage with the local business community, and our teams talked at length with SMEs and advisors about the economy, access to finance and the future for Scottish businesses.

My team reported a growing sense of confidence in the Scottish economy but cited a clear lack of awareness of different funding options – not from the intermediaries in the room but from local business owners.

It’s clear that there’s still a lot to be done to educate entrepreneurs and business owners that there are alternatives to bank-lending and that options such as invoice finance are often much more suitable.

Looking beyond traditional funding sources

Prior to the events in September, we published our latest regional business report ‘SME Sentiment Scotland’, which includes a study of 500 businesses. The findings paint a positive picture of the Scottish business environment but again highlight this overreliance on bank-finance.

Traditional bank loans and overdrafts seem to be the funding platform of choice for modern business owners – with 42 per cent of businesses opting for overdrafts, and 37 per cent bank loans, but these options are often not the best fit for growth and expansion.

Furthermore, at a time when bank lending continues to fall, independent funders like Bibby Financial Services have funds available to support growth.

Raising awareness of ‘alternative’ finance

I often avoid using the term ‘alternative finance’ because to Bibby Financial Services and the 7,000 SMEs we support, our funding isn’t ‘alternative’, it’s fundamentally important to the way in which they operate. But I do understand that there is work to be done in changing perceptions and raising the profile of non-bank finance in the minds of media, business owners, the public and even some intermediaries.

We’re committed to leading the march when it comes to raising this awareness and our events are a great start.

With a strong team in place in Scotland, I’m confident that we will be able to spread the word even further and increase our funding support to the country’s mass of innovative businesses.

If you would like to speak to my team in Scotland, visit

Thanks for reading.

David Postings

UK CEO, Bibby Financial Services

About David Postings

David Postings is the UK Chief Executive Officer for Bibby Financial Services following his appointment in April 2012. David is an experienced senior executive with over 35 years’ experience in financial services. David has extensive knowledge of the commercial finance landscape.

You can read more about David Postings and his position at Bibby Financial Services in the About Me Section.