Interviews

Andrew Mullinger: Facing the finance challenge

7 min read

04 May 2012

Entrepreneurs' Summit speaker and Funding Circle co-founder Andrew Mullinger on what to think of before you raise money for your business, why banks aren't always the best lenders and how becoming an entrepreneur gave him new trust in the UK economy.

Andrew Mullinger was a consultant at Ernst & Young before he co-founded Funding Circle in August 2010. Funding Circle is an online marketplace designed to help businesses and creditors find the right finance deal. While most SMEs are, says Mullinger, under the financial stranglehold of the major banks, Funding Circle wants to support the backbone of the UK economy with a modern approach: real-time information and no middlemen between business and lender. 

The firm has funded £30m-worth of loans to date. Andrew will be sharing his expertise at the 2012 Entrepreneurs’ Summit in June, and in advance talked to Real Business about a new approach to lending.

Sourcing the most effective money and putting it to good use will always be a priority for business leaders in the UK. What’s the first advice you give to a small to mid-sized business looking to raise funds?

Make sure you explore the options. Traditionally as a business you think of banks as the way to generate money, unless you’re a start-up thinking of angel funding or venture capital. Banks have had to contract lending and one market that really suffered from that was SMEs. Explore your options!

Second piece of advice: make sure you’re ready to make the application. You need to be able to express your business appropriately, explain yourself and ideally, if there’s a performance visible where losses were made, be able to explain the reasons why that happened. Show that you can manage cash flow adequately. Your business needs to be expressed in a way that the lender can understand quickly.

In March the UK government introduced a £20bn scheme to boost loans to SMEs, but recent reports by Ernst & Young have shown that write-offs on corporate loans have risen to their highest level since the nineties. Will the scheme really result in an increase in corporate lending?

From my understanding the government’s £20bn scheme brings down the cost of loans and doesn’t provide additional credit. The government has said this could lower interest rates by one per cent, and anything like that is a good thing. But there are statistics out there that show that there are more important things than the cost of finances. It’s also about the speed and certainty of funds.

On the Funding Circle marketplace our lenders bet against each other and the lowest rates offered win. The most important thing is the transparency, speed and certainty that comes with a straight-forward process.

To be fair to the government, they are trying to do something that will make things better. In a market dominated by five banks, the best thing they can do is to encourage competition.

The theme of this year’s Entrepreneurs’ Summit is “the growth challenge”. How confident are you that in, say, five years’ time, we will have a rebalanced UK economy, built around stable SME businesses?

Perhaps not in five years time, although I would love that to be the case. But we are definitely setting in that direction. When I used to work for banks I had one viewpoint, and after having set up my own company I had another. I was completely unaware of how vibrant the business community is until I was in it myself. The entrepreneurial community is getting bigger and is being stimulated, as Silicon Roundabout and other start-up clusters prove.

One end of the spectrum are start-ups funded by venture capital, but what you really want are the true entrepreneurs: the ones turning over £20 or £30m, or are turning over £2m now and are perhaps not investing because they have no access to funds.

Are you more positive about the state of small and mid-sized businesses since you have become an entrepreneur?

Before I started my own business I didn’t really have much to do with SMEs, it was always larger businesses. I didn’t know what was being done, knew too little about the innovation these businesses are doing. Now I’m part of the COO roundtable, together with companies such as Mindcandy, Songkick, Masabi and Unruly Media and the majority of these businesses are doubling their staff every year and expanding internationally.

You hear a lot of doom and gloom everyday, but when you’re part of a small business, you know that they are more agile, more nimble. With every challenge they face there is an opportunity. Bigger institutions find it more difficult to react. Capital and knowledge-sharing will help smaller businesses create a market, and as long as we can do these things we’ll see a resurgence of our small and mid-sized business sector.

When you were a consultant at Ernst & Young you once advised a major UK bank on its SME credit models. Would you give different advice today? How has the business environment changed since then?

I’m not 100 per cent sure what banks are doing, but we ourselves are moving to new data sources. We are working hard to get data from media or government sources, and to understand supply chain networks. Data available in businesses is more and more transparent. The question is: how do you look at that information? 

We are now putting real-time data in systems, which as far as I know will be the first time that’s been done in the UK. We need to make sure we can collect as much information as publicly available. Big data is massively important and a big priority for us at Funding Circle.