Gaining access to finance is one of the biggest hurdles any new business faces. It’s something confirmed by a recent survey from The Federation of Small business (FSB), which found 47 percent of businesses that made a loan application were turned down in the last three months. The FSB also found that only 37 percent of small businesses knew about alternative lending such as peer-to-peer platforms. What this highlights is that small businesses are still struggling to access capital and perhaps there is not enough awareness of the alternatives to bank funding.
To shed light on some of the key challenges growing businesses are facing in securing funding, we recently hosted a think tank called Finding The Finance at the Entrepreneur Country Forum: Palo Alto Goes Global event, bringing together entrepreneurs at different stages of growth, financial consultants and bank representatives. Moderated by Julie Meyer, serial entrepreneur and founder of Ariadne Capital and Entrepreneur Country, there were eight participants on the panel, including Jamie Conway, Founder of MadeTV, Hatty Fawcett Founder of Seek and Adore; David Hathiramani, A Suit that Fits; John Baldwin, Regional Director, Santander; Nick Watson, Partner, Grant Thornton, and Nick Gallop, EMEA Marketing Director, Dell Financial Services.
During the hour-long discussion, four main themes continued to emerge:
- Communication is vital: More needs to be done to bridge the communication gap between small businesses and lenders, banks in particular. It is however a two-way street as John Baldwin, Santander highlighted: “most small businesses immediately go for an overdraft, but that’s not always the best option for the business. Once we know what the business need is for the funding, we can provide options for what might work best.” It was a sentiment mirrored by Nick Watson, Grant Thornton: “It’s time to give entrepreneurs a simpler menu of what’s available. We need to find more tools to enable and encourage that dialogue”.
- Alternatives are available, but not clear: Between government lending schemes and bank alternatives, the available financing options often aren’t clear and small businesses don’t always submit the best information to help them build a strong case for finance. Seek & Adore founder Hatty Fawcett used Crowdcube, an online crowdfunding platform, to successfully raise funds for her business. In the last week the platform successfully funded five businesses. While Hatty has said her perception of large institutions has changed, she still questions ‘How do I even start that dialogue?’; ‘What’s the way in?’
- Use networks: Whether it’s accessing your existing business network or getting involved in new ones, tapping into the minds of other entrepreneurs can uncover a wealth of knowledge from lending experiences to new business partners. After all, Julie Meyer put it best “Entrepreneurs are generous people”. If you have a problem or need an introduction and a fellow entrepreneur can help, more often than not it’s in their nature to do so.
- Hire a financial consultant: You can’t be everything to everyone; for the sake of the business and your sanity, the panellists encouraged finding a good financial director in the early stages, suggesting that doing so can be the difference between growth and failure. A traditionally self-funded business, A Suit That Fits, took on a finance director recently, who helped be the conduit between the business and the bank. Co-founder David Hathiramani said: “If we had taken a financial director on years ago we would be ten years ahead, but we didn’t realise we needed one four years ago.”
Following the Finding the Finance think tank, I attended the Entrepreneur Country Forum alongside 300 other entrepreneurs and business leaders. The theme of the Forum was all about taking business global, about moving out of the Silicon Valleys of this world and shining a spotlight on the budding entrepreneurial hubs around the world from South Africa to Turkey. It marked the official launch of Entrepreneur Country Global, which with a 46,000+ member base, aims to raise this number to one million in 25 territories by the end of 2014. We are supporters of Entrepreneur Country’s Global mission and doing whatever we can to help businesses thrive and scale has been a long-standing part of our ethos at Dell. Our new Dell Financial Services arm is a great example of this commitment as we now provide leasing options for growth-enabling technology.
It’s an exciting year for us and Entrepreneur Country and our partnership continues to deliver on the promise we have made to back entrepreneurs and accelerate their ambitions. Look out for more news from Dell about how we will accelerate our support for UK entrepreneurs during Global Entrepreneur Week from November 18th – 22nd.
Look out for a downloadable report on the Finding the Finance think tank coming soon. And if you missed the think tank, you can watch the video here.