2 minute read
Merchant Money: The power of
The power of partnerships
Built upon trust
Amanda Hardy Head of Capital Markets Merchant Money
Now more than ever, the need for support within the UK SME sector is vast. Many small businesses are either seeking stability or attempting the growth they desperately need to realise their business potential. According to the FSB between 2020 and 2021, the total UK business population decreased by circa 390,000 (6.5%) – naturally the result of such a tough environment.
The alternative finance ecosystem works in a similar way to many other SMEs, meaning we are no stranger to the demands of seeking out funding partners to grow our business. Merchant Money’s recent £150 million fundraise to support our traditional products together with our Recovery Loan Scheme accreditation, was made possible through our close partnerships with funders who share our appetite to deliver to intermediaries and their clients, flexible and tailored long-term funding.
By adopting a broker-led distribution model, we rely on partnerships with brokers to help us deliver our funds to small businesses. The importance of finding the right lending partner, who will be able to support a business over time as they grow and evolve, is undoubtedly one of the most valuable assets when advancing a business.
For a broker, doing one’s homework on lenders will undoubtedly set the path to success for a client. It’s about asking the questions – do they meet the lender’s credit appetite, or specific sector focus if applicable, do they meet the communicated minimum investment criteria? For a potential borrower, it’s crucial to have a clear business storyboard that highlights the management team and experience, historical performance, business partnerships and digitisation, amongst others.
Helping a borrower get fit for finance is the next step. This can be done firstly by preparing data, as nothing tells a story like the numbers. Be specific on funding purpose. Why does the business need funding, is it to plug a loss or a new expansion project for example? Calculating the required funding amount, rather than simply applying for the maximum amount available, will improve the business’ current and future serviceability. This will help to align borrower expectations, and avoid applications being declined based on lack of affordability. Also consider available security or guarantees, as these may increase loan eligibility on higher risk applications or allow for a greater loan amount or, potentially, improved rates. These elements form a key part of positioning a borrower’s business comprehensively in their search for new funding.
The UK’s SME space will be an intriguing one to watch over the next year, as small businesses continue to overcome the financial ramifications of the pandemic and grow with the support of effective partnerships and the ongoing delivery of much needed funding.
