Access to finance for SMBs is a drum that is continuously beaten across the world. Many SMB finance providers jumped headfirst into the market in the last decade with the common goal of fixing exactly that systemic fault. It is evident that FinTech’s have already altered the market, however, the combined effects of Brexit and the Covid19 pandemic have created an uncertain environment and potential hardship for these newer lenders. Analysts are predicting a double dip recession in 2021.
The current state of lockdown across Ireland and the UK guarantee that the economy will be weaker still in the first three months of 2021, even if the government’s vaccination programmes go as planned and restrictions are gradually eased. This may indeed be the first experience of a recession for some lenders and this will prove to be a test of the longevity of their credit decisions and risk models.
It is likely that as with any contracting economic market, we will see liquidity reduce, credit or risk decisions become more conservative and the credit insurance market reduce exposure limits. This liquidity shortfall will become exacerbated for SMBs once we come to the end of the government support schemes, largely due to the fact that the major providers of SMB lending – the likes of the banks, Funding Circle and IWOCA in fact became the largest writers of accredited loans.
But this is not necessarily the end of SMB lending. Nuances within investor risk appetite means that no product is a one size fits all, and even those businesses that are deemed riskier – because of their age, sector or growth stage – should be able to find a suitable finance offering.
The existing financial services ecosystem has evolved to a state where traditional financial institutions and FinTechs – both of whom have been vying for the minds and wallets of end customers will now have to work more closely in an effort to innovate. Fintech’s dynamism and the banking sector’s traditional experience are a force to be reckoned with in successful collaborations.
But it is the smaller working groups popping up that may bring about a set of unique products to a larger number of businesses, and those in the underserved SMB segment. There are already players in the market who have sought company with other complementary funders to ensure that their existing and new clients survive through this period of time with alternative or top up offerings.
The Practicalities of Partnerships
The Accelerated Payments product was designed from day one to sit alongside other funders. Whether whole book, single buyer or even single receivable finance the individual contract and the lack of security taken means that the product can be flexible to each situation and provide a value top up mechanism for the SMBs who are in need of additional working capital. Recent scenarios that we have seen working alongside other funders are:
- A manufacturing company wanted to export to Japan which was not covered in the existing funder’s policy
- A Manufacturing company had reached their maximum exposure and concentration limit with their existing funder so required a selective receivable “top up”
- A funder was unable to secure the credit insurance limit required to finance a particular buyer so carved out to enable their client to receive funding through Accelerated Payments
In essence, we are partnering with other funders to support and boost the SMB population which will drive economic recovery.
What does this mean for brokers? Accelerated Payments can work alongside your existing lender panel to provide a top up facility where needed. In addition, if Accelerated Payments are not able to work with your client, we’ve added to our arsenal of options and may point you in the direction and even make an introduction to a lender.
What does this mean for lenders? You can keep your client relationships and we will work with you and the client to support them with our flexible funding option without impacting on your security.
What does this mean for the client? Access to a greater level of working capital than under a single provider model, thus allowing you to maximise the amount of funds you can access to provide you with the best chance of success.
If you’re in interested in talking about collaboration then please drop me an email [email protected]