20 Things You Should Know About Small Business Finance

ART Business Loans Team

As ART Business Loans celebrates its 20th birthday this month Steve Walker, Chief Executive since launch, offers 20 insights into ART’s specialist area – access to finance for small businesses.

What has changed?

  1. There is much more choice for small businesses today than there was 20 years ago – many alternatives to the banks have emerged. A good starting point for information about these is www.thebusinessfinanceguide.co.uk
  2. Banks are still the largest volume provider of finance to businesses, but are no longer the first point of call for many micro (under 10 employees) and early stage small businesses.
  3. Invoice discounters, peer lenders, crowdfunding and responsible finance providers such as ART have grown substantially since 1997, as the banks have reduced their share of the market.
  4. Business funding today is much more likely to be obtained as a package from different sources.
  5. There is now a targeted Start-up Loan programme fully funded by national Government. For full details see: www.startuploans.co.uk.
  6. The use of personal loan finance to support early stage businesses has grown substantially. This has been further driven by low interest rates.  This does, however, favour individuals with a good credit history.
  7. More businesses are being started than ever before, especially in the last three years.  The vast majority of these are micro businesses.
  8. The irony is that public sector spending cuts have meant a drastic reduction in freely available business support.  In the late 1990s there were considerably more agencies providing direct support and encouragement for these businesses.  So why are there more start-ups?   The move to self-employment and business creation has emerged through necessity, changing economic times and an increased entrepreneurial spirit.
  9. Equity investments have moved well away from small businesses with most funds starting to invest above £2m. There are some smaller funds, which are partly supported by the public sector.
  10. Changes in the world of small business finance, although many, do not compare with the changes in the names of the organisations involved!  For example:
  • DTI became DBERR, which changed to BIS and is now BEIS.
  • National and local players have been lost, including the Small Business Service, Business Link, Enterprise Link, AWM. Now we have LEPs, Growth Hubs, BBB, WMCA and Midlands Engine.  Lots of new initials, but little promotion to raise awareness of them.
  • Community Development Finance Institutions changed their name to become Responsible Finance Providers. Our own organisation changed from Aston Reinvestment Trust to ART and then to ART Business Loans.

What has remained?

  1. There has continued to be a concentration by the finance world on supporting high growth companies – ‘gazelles’ and ‘unicorns’ are actively being sought.
  2. Despite many schemes and programmes being launched, no-one has yet found the magic solution to spot either the flighty animals that don’t ultimately stay the course or in many cases even the high growth successes.
  3. The failure rate of start-ups remains at a high level.
  4. There is little support provided for businesses that have passed the start-up stage and want to achieve modest growth or stability for the future.
  5. Small businesses and start-ups still require help and advice to meet their objectives and obtain appropriate finance.  ART has produced free guides which can be found at www.artbusinessloans.co.uk/resources.

What of the future?

  1. EU funding has been a constant source for access to finance initiatives over the period.  What priority will be given by national government and local government to this issue?  We wait to see – there is no indication yet.
  2. Will the devolution agenda lead to an increase or decrease in help for small businesses?  The words from all parties, nationally and locally, appear to indicate that there is a desire to provide opportunity for all.  We hope these translate into actions – but it’s not guaranteed.
  3. ART has funds to lend now throughout the West Midlands, between £10,000 and £150,000, to support any viable business that is unable to obtain its full requirements from the banks.
  4. The businesses supported by ART over the years have covered most sectors and reached out to all communities.
  5. ART remains well placed to achieve more in the years ahead, supporting its original mission of ‘local jobs creation and preservation, and access to finance for enterprise’.