With just one week to go until our inaugural Think Global summit, we caught up with Rhydian Lewis, Founder and CEO of Ratesetter peer to peer lending platform. Rhydian shared some advice for SMEs and a sneak preview of his session: Accessing the right financial products and sources of funding to support growth.
You launched RateSetter in Australia just a few years ago. What advice do you have for other SMEs looking to build their business internationally?
Yes, we exported our IP by launching RateSetter Australia in 2014. RateSetter Australia has a separate management team and balance sheet. We didn’t set out to launch there, but we were presented with a particularly compelling opportunity. There is actually huge opportunity for us in the UK and that is our main focus, so while we would consider similar opportunities in future, it’s not a proactive priority.
Compared to businesses in other countries, productivity at UK SMEs is stubbornly low. But this is not because of a lack of drive, ambition or effort! To become more productive, businesses often need investment to purchase new equipment, hire more staff or cover cash flow, and that’s where RateSetter can help.
What financing options are currently available for UK businesses?
Broadly speaking, the key choice is between equity and debt finance options:
Equity can be a good way of raising capital if a business is just getting started, or perhaps expanding quickly and possibly making a loss. In exchange for providing money to the business, the new creditors are effectively buying a stake in its ownership.
If the business can afford to repay a loan (which means that it has good turnover and is profitable) then a loan can be a good way of securing funding without giving up any ownership.
How can SMEs make an informed decision on which of these options is best for them?
A sensible place to start gathering useful information on the various options is this Business Finance Guide, put together by the British Business Bank and the Institute of Chartered Accountants in England and Wales (ICAEW). It is written by an impartial body so the information is objective.
What barriers do SMEs face in accessing the right financial products to support their growth?
One of the main things that springs to mind is awareness of the options for finance. We’ve introduced a team of regional relationship managers spanning the whole country who will help connect us with creditworthy businesses looking for finance to invest and grow, and we also have links with a range of introducers who can help businesses to identify the most appropriate finance option for their needs.
SMEs have (and continue to) become increasingly diverse in their nature and business models. This can mean that a well-run, creditworthy modern business may not fit into the traditional model that a bank is used to working with and understands. This is not a problem for more forward-thinking finance providers who are better able to accommodate different types of business and can be more flexible.
When a business has decided to seek finance and has a plan for how the money will be used, they want to obtain it as quickly as possible. The traditional process has been slow, often taking several months for a bank to reach a decision on whether to provide a loan. Non-traditional lenders tend to be much faster – for example, at RateSetter it typically takes two weeks from application to funds being made available.
In your experience working with SMEs from across the UK, have you uncovered any common misconceptions around funding and support available?
Some business owners may think that by looking at sources of finance outside their bank, it could harm their relationship with the bank. However, doing this is actually very common and there’s no reason for a bank to object to another finance provider being involved – in fact, it’s a good sign, shopping around for the most appropriate source of finance is an indicator that a business is well run by a proactive and competent management team.
Think Global will bring together a range of high-profile experts and entrepreneurs from across the business world, to discuss the barriers and opportunities to international trade. You can register to attend Think Global 2016 here. We look forward to seeing you there!