Managing Your Cash Flow

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Challenge the bank

3 Mins

Myth 1: Banks only lend to existing businesses

Huw: “We look to lend to any strong, innovative business – regardless of size, how long it has been operating, or industry sector. We’re really keen to lend to start-ups with strong management teams and in 2010 alone, we helped 2,500 businesses start up each week, with over a quarter taking either a loan, an overdraft or a credit card.”

Myth 2: Customers must have security in order to borrow

Huw: “In reality, we lend to many smaller businesses without taking security, providing we have confidence in the company and in the skills of the management team. For larger businesses, the Enterprise Finance Guarantee (EFG) scheme is a good way to borrow if they can not offer sufficient security. Last year, for example, we supported engineering firm Romax Technology in achieving an EFG loan for £1m. The firm used the funding to build expertise and experience in a new industries – hybrid vehicles and wind energy.”

Myth 3: Businesses should only approach their bank once they have developed their strategy in full

Huw: “Actually, we encourage businesses to come and discuss their plans with us in their formative stages, rather than presenting us with a finished article. We think it’s useful to get an objective and experienced view while making initial decisions about which direction your business will move in next. By working with companies to develop their plans, we can make sure they’re put together in a way that will be awarded financial support.”

Myth 4: Businesses should be saving, not spending until the economy is completely recovered

Huw: “Innovative, forward-facing businesses use the economic environment as an opportunity to get ahead – either to expand their business or target new markets. For example, a cheese-processing company based in Wales called GRH Food Co recently secured finance from HSBC to redesign its factory space and purchase new machinery. In doing so, the firm increased its production capacity by 60 per cent and was able to start manufacturing a new product, targeting a new, expanded customer base.”

Myth 5: Now is the wrong time to seek finance for growth/international expansion

Huw: “In actual fact, the current economic environment presents an opportunity for international growth. As the domestic market contracted in the recent recession, many firms broadened their outlook and explored opportunities to trade in new, growing markets which they might not have considered in a buoyant domestic environment. Our recent Global Small Business Trade Monitor shows that emerging markets are experiencing a surge in business confidence, with 43 per cent of respondents in these markets predicting growth in their local economy over the next six months. This confidence can be attributed to increased private consumption, global re-stocking and liquidity from the West and presents a huge opportunity for many UK businesses as demand continues to grow.”

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