Lloyds TSB Commercial Banking: We are lending to small businesses

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Gareth Oakley, regional director for Lloyds TSB Commercial Banking in London and the East, discusses confidence levels amongst UK SMEs and explains how small firms can access the funding and support needed to help them grow. This article is part of the BusinessZone.co.uk Finance Masterclass.
As the first quarter of 2013 draws to a close, now is a good time to examine how firms across the country are faring as we move through the year and look at the ways they can adapt in order to ensure they are in the best position possible to take advantage of growth opportunities. 
There’s no doubt the market remains tough, particularly for SMEs, and the backdrop of a struggling economic climate has resulted in firms taking a more cautious approach to investments and expansion plans.
Confidence amongst the UK's SMEs
The latest Business in Britain report, published at the beginning of the year, presented an encouraging picture. The results revealed that a significant proportion of firms across the country felt increasingly confident with over a third saying they expected orders to increase over the first half of the year. A similar amount said they also anticipated that profits would increase too.
Yet it’s fair to say that a certain sense of trepidation remains, indeed this was reflected in the report which revealed that only 19 per cent of businesses surveyed expressed an intention to increase their investments, with almost half citing weakening UK demand as one of the greatest threats to their business performance. 
While it is understandable that many firms remain wary, an uplift in confidence is something we want to actively
encourage. The recent Budget set out a range of measures that should help give start ups and SMEs the support and confidence that they need to flourish - and the success of this Budget should be measured, at least in part, by the confidence it induces in the sector.
Securing finance
In order for business leaders to maximise their growth, it is essential they ensure that they are in a strong position to take advantage of any opportunities that come their way. Having access to the right funding and support is a pivotal part of this and it will give businesses reassurance that they can effectively cope with any potentially difficult or challenging times.
It is no secret that many businesses believe that securing investment can be tricky, particularly given the challenging economy. There is a strong misconception that banks are not lending, but in actual fact, this is not true and one of the key things for small business leaders to remember is that there are many options available beyond a traditional loan.
The biggest challenge for many firms is accessing the finance they require and understanding what steps they can take as a business to ensure they are in the best possible position to secure this. Working with the right financial partner is key to this. Having someone who understands the industry, the challenges faced and what finance packages would best suit an individual business’ needs is half the battle.
When looking to access additional finance, a good place to start is with a business plan. It is important to spend some time creating a clear, strong plan with financial forecasts, clearly thought out for the next three to five years.
Business leaders will also need to anticipate issues which may require additional finance going forward. Demonstrating that previous accounts are in order and fully illustrate the past performance of a business is another important measure to be taken. Business leaders will need to be able to explain clearly what the funding will be used for and give a detailed outline of how they intend to pay the money back.
These details, along with an overall picture of a business and its history, will make it easier for a banking partner to determine what form of support is most appropriate and will be of most benefit. There is a whole host of options available, all of which can help small companies grow and develop.
The options available
Firstly, there is a term loan. This is a structured borrowing method, based on lending against a security - such as a company’s assets or another form of guarantee. Overdraft facilities can also provide a boost to working capital if a project is underway that may impact cash flow. If companies are looking to purchase new business premises, a commercial mortgage can also prove suitable.
There is also a number of government schemes designed to help growing firms, including the government's Funding for Lending Scheme which enables businesses to benefit from discounts on their interest rates.
Asset based finance facilities such as invoice finance, which includes invoice discounting and factoring, may also be appropriate. This form of support has come to the fore in recent years as a viable alternative to traditional loans and overdrafts, or a complementary form of funding to boost working capital when required.
This cash flow solution is leveraged against a business’ order book and therefore grows in-line with sales, enabling a firm to immediately capitalise on increased demand. By advancing the value of up to 85 per cent of a company’s issued invoices, the funding bridges the gap between sending bills and receiving payment, creating greater financial headroom.
Whatever a business’s goals are, it is important to remember that there is support available for them and it is essential to start actively seeking out new opportunities. 
For more expert advice on business finance, click here for the BusinessZone Finance Masterclass.

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