We need the UK’s small but growing businesses now more than ever.
Some 36,000 UK SMEs turning over between £1m and £50m. Despite being small in number they make a disproportionate contribution to the economy. They employ 3.5m people and have a combined turnover of £639bn.
They must be at the heart of the economic recovery.
Many of these firms are now looking to recover, rebuild and grow. But few can access the right financing they need to implement their plans.
Instead of looking towards traditional banks that are unable to help, growing SMEs should instead look toward alternative financiers that offer long-term funding.
What’s the issue?
UK high street banks have pulled out the stops to help their business customers throughout Covid-19.
They have helped deliver more than £11bn across 52,275 loans to UK SMEs through the Coronavirus Business Interruption Loan Scheme.
However, because of this, many traditional banks will not have the available finance or the capacity to service new clients with new financing.
A drought of supply to growing SMEs
The UK’s 36,000 small but growing firms need between £500,000 and £5m in growth financing. Underserved by traditional banks, debt funds and peer-to-peer platforms, we call these the ‘missing middle’.
These firms need long-term growth funding, not just short-term liquidity. Even before Covid-19, there was a lack of supply of this type of finance.
Now, traditional funders are simply unable to help as resources are focused on providing short-term distressed credit to current customers
So, a shortage of supply of long-term growth funding has quickly become a drought.
The role of institutional investors in funding SMEs
Large institutional investors have the scale to offer a genuine alternative to the banks in funding these small but growing SMEs.
Institutional investors are long term by nature and lead on environmental, social and governance (ESG) issues.
Unlike traditional lenders, Caple offers access to this new source of finance for firms in the ‘missing middle’.
We offer fully unsecured growth financing of between £500,00 and £5m based on the future cash flows of the business. We require no collateral or personal guarantees as security.
Loans work alongside existing ending so firms can access more funding than from traditional sources alone, and maintain existing relationships.
The loans are part of BNP Paribas Asset Management’s SME Alternative Financing direct lending platform, which enables SME’s access to funding from institutional investors.
Long-term funding for growth
SME balance sheets are being eroded by short-term, fixed repayment loans offered by banks.
We, however, can offer loans of up to eight years.
Long-term funding provides the visibility and stability firms need to plan and invest in areas that will grow the business over the long-term.
Such funding also removes the short-term pressure on cash flows, balance sheets and immediate performance.
Pure unsecured lending, without the need for floating charges, personal guarantees, or security, means firms without physical assets can access funds and grow.
Pure unsecured lending also means business owners don’t need to give up equity and ownership to fund growth. They keep long-term control of their business.
Small businesses are looking to rebuild and grow
As the economy reopens, many SMEs are looking for financing as projects that were locked down come off hold.
For instance, since March to date, we’ve seen double the increase in demand for the loans we offer access to.
We need the UK’s small but growing firms now more than ever. As jobs are lost, creating new ones will depend on the missing middle firms rebuilding and growing.
But such firms need access to new long-term unsecured funding that helps them plan, invest and grow.