Trade with confidence
A gift to myself last Christmas was a personal memoir on the founding father of a brand I grew up on. All that power of television commercials and the hundreds of athletes that sport this particular brand found its way to my subconscious mind, leading me to curiously explore my potential on and off hundreds of basketball courts since I was 9 years old. So how about the fact that this sportswear giant was the first to employ an age-old technique to solve a modern conundrum: how to create a lightweight shoe that fits like a sock but has the support of a trainer.
I remember my father showing me a tape of Michael Jordan suspended in mid-air, 45 inches above the ground while switching hands to lay-in the basketball applying such delicate touch against the backboard in a heated game against the Los Angeles Lakers in 1996. His air highness at his finest with a pair of Nike’s on his feet! But the road to being a powerhouse in the shoes and apparel market was anything but pre-destined. The year was 1970… eight years into the birth of Blue Ribbon (known as Nike today), Phil Knight recalls a conversation with himself, ‘Confidence! I wish I had more of it. I wish I could borrow some because confidence is cash! You better have some to get some. And banks are loath to give it to you.’
Fast forward to today
Phil Knight’s turbulence packed biography ‘Shoe Dog’ is a timely reminder that SMEs can weather the storm as they journey through 2019. Key decision makers up and down the country should not be distracted from delivering on their ambitions and thriving – so long as they know how to secure the appropriate type of funding they need. But then again, do they?
Paving the way forward
A recent research released by the Financial Intermediary and Brokers Association reported that 46% of SMEs are declined loans by high street banks. Half of those businesses who applied for funding that were declined, chose not to look elsewhere to source funds simply due to a lack of awareness of alternatives. From experience, inability to effectively navigate the lending market and uncertainty about lenders they had not heard of before influenced their lack of action. That said, I have seen a shift in the mindset of business leaders feeling more comfortable thinking about all the different funding options that exist outside of mainstream lenders. I helped raise capital for an office move, investment to support new product launches, satisfying suppliers overseas, financing VAT bills, day-to-day application of invoice finance to manage cash flow fluctuations… just to name a few. Therefore, access to the right type of finance becomes reality when you have an unbiased broker or adviser who takes a keen interest in your growth.
How has my relationship evolved with businesses over the last few years?
Had you asked me 3 years ago, rates would have been the most important factor for borrowers. Now, I see greater demand for sophistication of lending products that fit the needs of established businesses that typically turnover in excess of £2 million. Key decision makers who have already had experience using debt finance are asking:
- Are there lenders willing to support my niche market?
- Despite our recent slump, are there ways to look beyond the numbers?
Considering our pre-profit stage, what are the lending options to facilitate our growth opportunities?
- As I expand, are there lenders that can offer me sophisticated lines of credit?
- Are there credit lines that can help me meet my obligations with overseas suppliers?
Especially regions considered high risk?
The challenge is enhancing the avenues by which information about the wider lending market is made readily available to key decision makers. This is a matter of urgency for the financial services industry as well as public bodies and business representative groups.
How is technology playing a role in the lending space?
In a recent interview with the Minister for digital, Margot James said, “The UK is a haven for tech investment, with stellar investors helping spread success across the country and bringing new jobs, wealth and improvements in productivity.” It’s pretty clear the alternative lending market has accelerated within the tech-based ecosystem by adopting technology in their decision making. It’s helping businesses access funding faster, whilst making processes smoother and less time-intensive for brokers and advisers. Better under-writing processes is enabling growth-driven lenders to focus on serving more and more scaling start-ups at a pre-profit stage with the goal of structuring their funding needs long term. So, armed with in-depth knowledge, there has never been such an exciting time to source a variety of credit options given the growing number of new lenders coming to scene with appetite to support a spectrum of industries.
Nike’s woes as a scaling start-up
The sudden boom in demand for running shoes in 1973 added to Phil Knight’s growing pains. For instance, when shipments were late, shoe sales plummeted. When shoe sales plummeted, they weren’t able to generate enough revenue to pay Nissho Iwai, their Japanese based creditors at the time. Meeting their obligation to pay Nissho on time at the end of the month – among all the other creditors they had to satisfy was like ‘passing a kidney stone’ as Phil recalls it. Occasional months where they couldn’t pay Nissho on time, they couldn’t borrow more. When they couldn’t borrow more, they were late placing their next order. Round and round it went.
Fast forward four decades, the world of business credit is not as limited as it once was. With all the tailored means of lending available in the market today, my conclusion is the acute lack of awareness preventing young, promising and even established businesses from fulfilling their true potential. For many business owners reading this, you will have had countless soul-searching conversations with yourself about:
- What your business stands for
- The personnel you are responsible for
- The communities you serve
- Contributions you make for your loved ones
SMEs are the lifeblood of the UK economy, period. Despite the financial crisis, the total number of SMEs has grown over the previous decade. They have been instrumental to job creation, with approximately 16.1m employees in 2017, representing ‘60% of all private sector employment’, this according to a recent study carried out by EY (December 2018) titled The future of SME Banking. SMEs are equally important to UK plc, with a combined annual turnover of £1.9tn, covering 51% of all private sector turnover in the UK. In times of austerity, the Government has relied heavily on the growth of SMEs to help fuel the economy and, in uncertain economic times, further emphasis has to be placed on this key sector.
The Takeaway
For small businesses to collectively have a positive or negative multiplier effect on the greater economy is all dependent on an ecosystem of business friendly and savvy lending institutions, of which there’s a growing number. If you’ve made it this far, then I believe this to be true… hope and inspiration is what we make of it and I can conclude to say reading through Phil Knight’s unfiltered memoir in his early years offers exactly that.
Would you like to know more?
FundingSmiths is an independent credit partner for growth-driven SMEs seeking structured working capital solutions. Our goal is to facilitate your long term capital needs. If you would like to discuss your objectives in more detail, we’d love to hear from you. Please email info@fundingsmiths.com or let’s talk to discuss further.
