The future of borrowing for SMEs - Barclays Bank

The new funding ecosystem The gap these lenders previously filled could, she says, be replaced by equity or risk capital – something that a stronger venture capital market in the UK and better access to private equity can make possible.

What has changed, however, is that borrowing options have widened and become more bespoke, and this is a trend that Rusling sees developing during 2015.

“The conversations we have with our clients now encompass alternative sources of finance. It’s not all about bank lending. They should have access to what’s right for their business and their lifestage. A diverse funding ‘ecosystem’ is good for business,” he says.

That ecosystem includes options for SMEs, such as crowdfunding, business angels, start-up loans, investment firms such as Business Growth Fund and venture capital. Banks like Barclays are learning from, and working with, these new lenders, introducing them to clients where they offer the right funding option.

“The new lenders available to SMEs tend to be nimble and fast,” says McNeil. “Crowdfunders have slick online processes that mean customers get their money very quickly. We’ve learnt from their experiences and moved ahead of the game.”

In the larger corporate space a number of direct lenders have come into the market. These are providing complementary options alongside traditional bank lending and Barclays works with a number of them. An example is Barclays’ partnership with Bluebay Asset Management to provide blended funding, or unitranche loans, of up to £120m, designed to fill a gap in the market, targeting businesses that aren’t yet big enough to access the capital markets.

As another example, Barclays introduces direct lenders, such as pension funds, into deals where they can provide longer term capital than the bank.

“They’re not always competition for the banks,” says Rusling. “It’s about complementing each other. The bank’s strength comes from being able to work with customers to design the funding strategy that fits them perfectly, presenting a range of options available to the business and how the bank can help support.”

A more fluid approach to lending

Barclays has a proven track record in innovation in how it does business, for example, launching the Pingit for Corporates mobile payment service and video banking. McNeill adds that, in the funding space, alternative lenders have provided creative ideas which are driving developments, such as the streamlining of processes around arranging finance.

“In a speech recently, Vince Cable said the average SME thought about getting finance two days before they needed it.

So, how do you give a business the help they need almost instantly?” One solution already being offered by Barclays to 300,000 SMEs is a pre-assessed credit limit. The company and the bank’s business manager can see online how much is available to borrow and, for amounts up to £25,000, it takes just five clicks to get that money into the company’s account within 24 hours.

As well as beating the crowdfunders when it comes to ease and speed, it demonstrates a more fluid approach to lending that will smooth the way to growth for larger corporates as well as the SMEs.

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An interesting glimpse into the future for Australia?