It is often said that it is better to be single than in the wrong relationship. While this adage wasn’t written for the commercial finance industry, it nevertheless provides food for thought as the debate surrounding traditional banking continues.
With bank lending in the form of overdrafts and loans still on the slide, UK businesses claim they are getting a raw deal. Trust and confidence in financial institutions is equally in short supply, with many believing a "computer says no" mentality has now superseded what was once a very personal service.
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The importance of relationships was the key theme at a recent meeting between SMEs and the Parliamentary Commission on Banking Standards, the body which was set up following the Libor rate-setting scandal to take a closer look at the banking sector’s culture and professional standards.
Delegates suggested the economy would struggle to recover until the relationship aspect of finance facilities returned. They argued the bank manager-customer relationship has been replaced by a matrix and tick-box system when it comes to traditional funding applications, which has led to the falling lending statistics.
Separately, Real Business recently asked visitors what they thought was the most important thing that any new bank would need to offer in order to shake up the business lending landscape. Above all, the majority (51%) wanted the bank to allow their business to work with an advisor that knows the business. While it is clear that SMEs are searching for the right funding facility to help them through these testing times, personal relationships appear paramount.
This is an area the asset-based finance sector pays particular attention to. Unlike traditional finance, facilities are structured to meet the business’s requirements and provide funding that grows in line with its turnover.
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By GlobalDataFrom simply releasing cash against the debtor book to bolting on additional funding against a range of different business assets, facilities can assist businesses of all sizes. Debtor protection can also be incorporated to safeguard the business from the threat of bad debt and protracted default.
The presence of a designated client manager is also a significant draw, giving the client access to an individual with a good level of insight and understanding into their business. They will also have a vested interest in delivering a good level of service and ensuring the facility meets expectations, on both sides, throughout its duration.
This emphasis on relationships is a key factor behind the support the sector continues to provide and an area where traditional finance has unfortunately fallen behind. The saying that people buy people has rarely been so true, with that personal touch so critical in businesses’ decision processes when it comes to selecting their finance facility.
Evette Orams is managing director of Hilton-Baird Financial Solutions
