Technology moves so fast it can be hard to keep up with the latest developments. And it’s certainly true that business borrowing is being changed radically by new digital processes, and the general shift online. We in the alternative finance industry have embraced these faster, more efficient methods of receiving applications, assessing risk, and deciding funding, as we discussed at length in Boost Capital’s recent white paper entitled Man versus Machine: A Collaboration That Pays. A degree of automation in loan decisions means that SMEs know if – and how much – they can borrow far more quickly, allowing them to get on with the important business of running their enterprises.
But I also strongly believe there will always be a place for human judgement in what we do. Deciding to lend a larger amount of money to a company over a longer period requires experience, intuition, and an understanding of the nuances of a firm. That typically involves a human being talking to management, seeing how the company operates, and getting to grips with its future plans. And it’s not just lenders who fulfil this important role. Brokers are a vital link in the chain, visiting premises, advising business owners on their funding options, and guiding them in the direction of the type of finance that’s best suited to them.
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I’ve heard some within the broking community expressing fear they’re being rendered redundant by the greater use of technology in business finance. But, just as I think the human touch is essential at a certain level of loan decision-making, it’s still necessary when firms are deciding how to borrow, too. Far from being put out of business by algorithms, I think good brokers could see more work coming their way from increased use of online processes. They have an expertise that’s valued both by small businesses, and by funders.
Companies want some help navigating the maze of funding options they face. And lenders trust the intermediaries to introduce them to the right kinds of enterprise. A machine can never entirely replicate that knowledge, or those years of experience.
There’s no such thing as one size fits all in business. Companies come in different forms, diverse sectors, and with varying circumstances. The alternative finance industry is evolving quickly to develop new financial products that offer this multitude of SMEs far more choice about how they gain access to finance, what that funding looks like, and how it is repaid. But with greater choice inevitably comes some confusion, and the smart brokers are those who are acting to demystify these new options for business owners. Their experience of working with small companies over many years means they can truly get under the skin of an organisation, and understand whether this business should be applying for asset finance, a short-term loan like ours, or even tapping into the world of crowdfunding.
This is where the strength of a successful commercial finance broker lies – in their role as advisor. Some intermediaries are happy to act just as distributors, simple conduits between SMEs and business lenders. But their real value is in their ability to counsel firms, understanding what makes them different from their peers, and weighing up the type of finance that will genuinely help them, whether it’s from the traditional end of the spectrum, or one of the many innovative options available from our fast-growing industry. That advisory function will become ever more important in an increasingly digitised age, I predict. And it’s those brokers who promote this strength who will really succeed.
Some lenders will only do business with a broker when arranging a deal. It’s not true of us here at Boost Capital – we work with brokers, and communicate with business owners directly. But others prefer to rely on brokers’ particular ability to present businesses that are closely suited to a lender’s profile, and offering. And savvy intermediaries are already cultivating strong relationships with funders in the alternative finance space in order to be able to organise the types of deal that the mainstream lenders simply can’t – or won’t – offer.
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By GlobalDataThe quality of advice given will improve, and I anticipate businesses will become more demanding in terms of what they expect from brokers, and lenders alike. They will want evidence of added value, and it’s those brokers who can demonstrate their worth who will win in the race for all this new SME business. I hope they see the opportunities ‘the machine’ presents. Technology is creating new financial products, altering the route companies take to find them, plus changing how funding decisions are made. Rather than seeing it as the end of an era, clever brokers will recognise the start of a new chapter, and one that they can play a significant part in shaping. We want to work with them to do this because we know how knowledgeable they are about the UK’s small business community. Times are changing, but that needn’t be a cause for fear. On the contrary, brokers have the chance to be a part of a true revolution in business finance.
