Bibby beats banks to top factoring table for SME funding


Earlier this month, the business finance publication, Business Money, published its annual receivables review league table, showing Bibby Financial Services as the market leader in relation to factoring assignments for 2015.

What this means is that we funded more debt than any other Factoring provider, freeing up our clients’ cashflow and helping them to grow.

We were also ranked second in terms of client numbers, seeing growth during a time where most other invoice financiers in the top ten saw a decline in the number of businesses they support.

It’s been widely reported that the landscape for SME finance has changed significantly since the end of the financial crisis. Asset based finance providers have taken on a bigger role in the funding of SMEs as the banks have tended to retreat from the market, due to tighter liquidity and capital requirements imposed following the financial downturn.

As a funder with a rich history of financing SMEs over 34 years and as part of the 200-year-old Bibby Line Group, it’s often been said that we have the expertise and financial backing to compete with bank-owned invoice financiers. But what Business Money’s receivables review reveals is significant. Not only are we competing with the banks’ invoice finance arms, we’re the first non-bank funder to lead the industry for a generation.

A relationship-based approach to funding

Throughout 2015, we continued to operate alongside a small band of established financiers that were able to grow their funding support in the face of new, online competition. We take a relationship-based approach to funding and – while we continue to invest in technology to enhance the way in which our clients can access the funding we provide – the service we offer is based on the relationships we have with the businesses we support.

We take a human approach to assessing risk and work hand-in-hand with our clients and intermediary partners to ensure that they have access to local decision makers and relationship management teams. In my view, it’s this that sets us apart from other funders in this space and is the reason for our continued success in the face of new competition.

While we have long been associated with funding smaller SMEs, in recent years – through the expansion of our product portfolio and formation of our Corporate Finance team – we now support businesses of all shapes and sizes across more than 300 industry sectors.

Examples like our funding for global car-care manufacturer, Turtle Wax; leading distributor Ripmax and more recently our support for investment company Valtegra’s acquisition of two UK-based manufacturers, demonstrate our capability in the Corporate financing space.

Today, through our growing product portfolio, including factoring, invoice discounting, lease finance and specialist finance for the construction and recruitment sectors, we support over 7,000 UK businesses. And with the launch of our new Foreign Exchange proposition to existing clients, this year, we’re continuing to bolster our support for UK PLC.

These results are testament to the commitment, drive and tenacity of our teams throughout the country, in addition to the support we continue to receive from our intermediary partners. This has taken us over 30 years and it’s been a great journey so far. I am excited about the future and for this reason, I’d like to offer a personal thank you to all our staff and partners for making this possible. Here’s to the next milestone.

Transactional funding and the art of building relationships


We’re living in a time of exciting change where the word “digital” is on many lips. A recent internal presentation from IBM declared that “digital disruption has already happened” given that Uber is the world’s largest taxi company without owning any taxis and Airbnb is probably the largest accommodation provider without owning any properties. What sets these digital services apart is that they do not seek to replace people with technology. They simply utilise technology to enable consumers and providers to connect more easily.

So, how does this digital world impact the SME finance market?  There is a common view that SME owners are happy operating digitally and received wisdom goes that digital means no people, no relationships and a world where everything is rational and transaction based. But the SMEs I speak with value the relationships they have with their funding partners and ask that they’re not kept at arm’s length through digital means.

I believe that successfully funding businesses and helping them to grow in the long term is  much more about relationships than transactional lending. For funders such as Bibby, it’s about taking a relationship-based approach to supporting our clients. Of course, this means providing innovative and up-to-date systems to support this, but it also requires personal communication – the kind a machine built solely for transactional interface simply can’t perform.

But for now it seems that many technology platforms see the trajectory as heading towards a more formalised model of online lending that involves less people.

What I sense is that when a company uses digital means to enable greater people contact in a way that is easy and simple, prospective clients will be happy to embrace the change. The implication for me is that this will not be a ‘rules based’ or ‘tick-box’ approach  but rather, it will need to embrace the flexibility of decision making based on the experience of people, facilitated by technology.

Understanding your customer and their needs is as important as ensuring the right level of funding arrives in their account at the right time. At this stage in our digital progression, we cannot lose sight of the positive role people play in guiding SMEs towards achieving their goals.

At Bibby, we are proud to be in The Sunday Times’ Best Companies to Work For as we feel this is testament to the emphasis we place on the relationships we have with each other and our clients.

For now digital-only platforms are operating in one corner of the market. If they want to move beyond transactional services they will need to provide a greater service to SMEs, a service we believe can only be enhanced through relationships between real people.

SME Referral Scheme: why the wait?


In its Small Business Finance Markets report published earlier this month, the British Business Bank (BBB) found that “over half of UK smaller businesses still go only to their main bank and do not shop around for finance.”

While choices available to SMEs have increased significantly in recent years, there is still a distinct lack of awareness of the full range of funding options available among many small business owners. It’s perhaps for this reason that the Government and BBB’s mandated referral scheme drew so much attention when it was announced two years ago.

First mooted in the 2014 Budget, the Government laid out plans to consult on legislation to help SMEs that have been rejected by banks to get the financing they need. Later that year, a list of ten banks were drawn up which would be required to refer SMEs on to other funders, should they be unable to support them.

Fast forward from its announcement in August 2014 to now, and we are still waiting for the scheme to be launched. The latest delay now suggests that the scheme will launch in the latter part of the year.

There are always going to be a number challenges and barriers to overcome when looking to strike-up dialogue between different public and private sector organisations. But if both SMEs and the wider economy are to start benefiting from the scheme, this dialogue is critical.

From what we understand at this stage, the next step is for the BBB to provide the Treasury with “full advice by the spring”.

What this “full advice” actually entails remains to be seen. However, with Spring fast approaching and the need for the Treasury to review and feedback, this leaves little room for the platforms and legal processes to be fully developed, tested, improved and then finally launched any time soon.

Of course the biggest losers from this delay are SMEs. For them, the delay hinders their ability to access a wider range of financing options.

According to research on behalf of the BBB in its ‘SME Journey Towards Raising Finance’ survey in 2014, two-thirds of SMEs only go to one provider when seeking finance and almost two fifths (38%) appear to give up their search for finance after their first rejection.

With the big four banks still dominating the SME lending market, for a third of businesses that are declined funding, there is no signposting of where to look next. It is this lack of direction and compass setting that desperately needs to be fixed.

Plugging the gap

While we await a government-led referral scheme, spearheaded by the BBB, private sector organisations are stepping up to the plate to plug the gap. Just last month, we announced that we had joined Alternative Business Funding.

Since it first launched in 2014 – around the time the mandated bank referral scheme was first mooted – the ABF has received more than 30,000 visits to its website, resulting in several thousand SMEs finding the funding they need.

While the Government and BBB continue to develop the schemes proposition, it is the private sector – and a collaboration of providers right across the funding spectrum – that is stepping in to fill this void, helping SMEs to obtain the funding they need to grow.

If such collaboration between funders can be reached in order to match the needs of SMEs, it’s surely just a matter of time before the BBB led-scheme is launched.

Until this time, however, SMEs will do well to note that there are services available that are already helping small and medium sized businesses to access the finance they need to grow.

The waiting room of change


From the outset, the newly elected Conservative Government made its ambition to nurture small businesses clear.  In Sajid Javid’s first speech as Business Secretary, he said that “small businesses are Britain’s engine room and the success of our whole economy is built on the hard work and determination of the people who run and work for them”.

Meanwhile in a signal of the Government’s specific commitment to small business, Anna Soubry’s role was re-named Minister for Small Business, Industry and Enterprise – instead of the broader version of Minister for Business and Enterprise.

Since then, the Government has started the ball-rolling on a number of initiatives which could be transformational for small businesses. Through the Enterprise Bill, the Government intends to create a new Small Business Conciliation Service to “help settle disputes between small and large businesses, especially over late payments” without the need for legal action and to appoint a Small Business Commissioner to  “help small businesses handle disputes over late payment and other supply chain practices that hit them especially hard”.

These steps have the potential to free small and medium sized enterprises (SMEs) from their chains and stamp out chronic problems which have hampered their growth.

These strong announcements in May and July are wending their way through Parliament as part of the Enterprise Bill. But Royal Assent can’t come soon enough as small business owners and decision-makers are really feeling the pinch. SME leaders are shockingly depressed about the outlook for their business: according to our SME Confidence Tracker, less than half (46%) of SMEs expect their business to grow. Meanwhile one in five small business decision-makers say that the uncertain economic environment in the UK is their primary reason for holding off on future investment.

Against this stark picture it is clear that SMEs need reassurance about their economic future, with the Government and policy makers providing as much ‘forward guidance’ as they can to give certainty to SMEs’ 2016 and 2017 business plans.

An area ripe for action is exports.  With only 1 in 10 small businesses exporting according to our Tracker, it’s time for more work in this area. The EU referendum will be pivotal as it is beyond doubt that exporting is easier because of the EU. Time will tell whether that is enough to help sway the vote.

The latest ONS Annual Business Survey figures find that the number of UK companies selling goods and services abroad decreased last year. We need to reverse this trend if the UK is to compete on the global stage. This requires a combined effort of ambition and imagination by both SMEs and the Government.

As they wait for the Enterprise Bill to become reality, small business owners occupy a strange sort of purgatory – the waiting room of a possible metamorphosis. The Government stands on the brink of positive reform, but in the meantime, it must reassure and comfort small business owners, who are overwhelmingly depressed in their outlook and sensing dark clouds on the economic horizon.

The threat (promise)of interest rate rises is likely to act as a drag anchor to any positive policy statements as business leaders tend – in the most part – to be a cautious bunch.

Creating the conditions for small business bosses to thrive


In the last few years many people have taken the brave step to become self-employed. At the last count the numbers had soared to their highest point in the last 40 years. Is this the ‘Dragon’s Den effect’ I wonder, or the result of something more fundamental?

The reality is that the financial crisis rocked employment levels and convinced people to strike out on their own. But this new generation of sole traders and small businesses face a tough time translating their core ideas into a commercial success.

As The Royal Society’s The Second Age of Small report recently pointed out, the Conservative party’s manifesto committed to creating 600,000 new businesses every year.  But what value is this promise when so many small businesses fail within the first couple of years?

The journey to starting a business could be eased through improvements in education. Many entrepreneurs plough straight into business and succeed with no training but many more simply fail quickly.

I often wonder how much less failure and heartache there would be – and how much more successful those that survive would be – if would be entrepreneurs were taught about pricing, cashflow management, VAT and directors’ duties earlier on in their lives.

Key areas of support

For those who are resource weak and time poor, the administrative burdens alone can be overwhelming. Sole traders in particular are faced with handling their own administration, finance and HR on top of delivering their products and services.

Small businesses need long-term guidance and support. It’s up to the private sector and the Government to provide effective services and policies that ease their burden and smooth their path to growth. Some of the most burdensome administrative tasks are:

  • This is another area that can cause considerable headaches. If you’re a sole trader you need to not only pay yourself but also pay your own tax and national insurance contributions. You are also required to enrol yourself and any staff (even if you only have one other) on a workplace pension scheme.

Some organisations that focus on the self-employed, like The Association for Independent Professionals and the Self Employed (IPSE) share objectives with the small businesses we speak to on a regular basis.

In IPSE’s manifesto they called for a strengthening of the Prompt Payment Code, setting up a small business conciliation service and, as a last resort, the introduction of strong statutory sanctions for late payers.

Whilst I believe that statutory sanctions may be somewhat draconian, we all share the desire to see policymakers continue to level the playing field for small businesses and to create the optimum conditions for them to thrive.

The private sector has to play an essential role in this as it can’t be left to the Government alone. Private business can play a bigger part by providing funding and a range of services that will help small businesses overcome any initial struggles and allow them to compete in their weight class.