John Lloyd, Director at Lending Connect joined Small Business Insights for an exclusive interview.
Please can you introduce yourself to the readers of Small Business Insights?
To give you a flavour of my professional life, I ran an events business successfully for five years before COVID hit. I then went to work for a lender, before setting up my business brokerage.
Because I’ve run a business before, I understand entrepreneurs and I have first-hand experience of their needs. Additionally, everybody that we employ has previously owned a business. We’ve tried to surround ourselves with people that have knowledge of both the positive and negative sides of running a company. I would say that, as an organisation, we approach client work with a high degree of empathy and realism.
What type of small business clients do you typically work with?
We’re getting a lot of businesses between the age of six to 12 months old that typically do not have extensive experience in business banking and lending. Given this, I believe we can provide clients with a lot of expertise regarding accessible financial products and the practical side of taking on business finance. The latter all leads back to the lived business experience of the team; we have all been in the same position as clients, which I think is quite rare.
Depending on the client it can be tricky, because you sometimes feel like you’re guiding them through the process of what it means to take on business finance, especially if the client does not initially understand the available products. Ultimately though, this is something that we’re more than prepared to do. We aim to make their business, our business, and give them the best advice to support their long-term growth as an organisation.
What are the typical funding needs of small businesses clients?
Oftentimes small business funding needs relate to cash flow gaps, caused by customers paying invoices late – a problem that affects thousands of UK SMEs. For a small business, it can become extremely challenging, as you find yourself constantly playing catch up with your finances. I feel that short term funding serves a real purpose in bridging that gap, during the period in which business owners face a short-term shortfall in their bank accounts.
Equally, small businesses are struggling with rising costs from their suppliers. Company owners are reluctant to continually pass on rising costs to the consumer, as this reduces the price competitiveness of their products and leads to lower demand (and thus, a reduction in revenue).
Businesses initially seek funding to plug an immediate financial gap; however, we are seeing many businesses down the line – after they’ve got themselves back on their feet and have stabilised their operations – seeking renewals and additional funding. More often than not, renewals and further funding is deployed for business growth initiatives, which is great to see.
Why do you think so many SMEs are now seeking business finance from alternative lenders, rather than banks and traditional financial institutions?
What is a bank? Sorry, I’ve forgotten! For a number of years, banks have not been serving the needs of small business clients. The funding gap for SMEs is now frequently met by alternative lenders. I spoke to a customer this morning, who has been waiting seven weeks for a call back from their business bank about arranging an overdraft. Small businesses have fast funding needs though! Alternative lenders like Got Capital are bridging the funding gap for small businesses when they actually need financing. I only see this continuing in the future, as banks seemingly no longer have the willingness to adequately support SMEs.
In your opinion, what makes a good lending partner?
As far as I’m concerned, a good lender is somebody who understands their products, is organised, and is clear with what information is required to progress a funding offer – I don’t like too much of a back and forth over phone or email. I know it’s part of it. But if you’re going to give me stipulations, just give me everything – even if the list is 400 items long! A drawn out back and forth is not good for the broker, nor the customer. It doesn’t happen with Got Capital though, which is a massive positive. I get an offer and go back to the client. “Do you like the offer?” They say yes or no. The process is really straightforward. That’s what I like and that’s what the customer likes – clear, concise and transparent communication with the lender.
What advice would you give to small business owners operating in today’s economic climate?
I think it’s simple. I believe that you need to regularly have a handle on your accounts, and have good visibility on your profit and loss. And then a critical question to consider is – can I afford that loan? The second question would be – how will it benefit us? And then we’ll have a conversation around that. You need to constantly ask yourself those questions.
I think investing in someone to oversee your accounts is a massive plus, because you can just pick up the phone and ask – do you think this loan would be good for my business? You’re getting professional advice. If I broke my leg, I’d go to a doctor, wouldn’t I (as long as they’re not on strike!)? And I think it’s the same here. I think that it is essential to work with trusted professionals. So, build a relationship with your broker, build your relationship with your accountant, build a relationship with your lender.
My final piece of advice to business owners – do not be afraid of debt. As long as borrowing funds from a lender has a business purpose and there’s a bigger picture, then the debt is not something to be scared of.
Small businesses access unsecured, fast funding from Got Capital. As an alternative lender, Got Capital offers financing solutions specifically designed for and catered to the needs of SMEs.
