The Manufacturer has partnered up with the alternative finance specialist ThinCats to make £100 million of funding available to UK manufacturers, as more and more investors are becoming increasingly keen to help fund SMEs.
“Although we are 10 years on from the financial crisis, its impact is still being felt by many companies who are not receiving the funding that they require from their banks,” said Steven Barr, the managing director at Hennik Edge, The Manufacturer’s expert advisory service.
The main issue for some SMEs is that they do not have the largest amounts of assets against which the banks are more willing to lend. As a result, many of them can’t invest in their growth, or delay investment until they reach the point they can fund it themselves. The wider knock-on effect of this problem is that the UK’s productivity and growth is being held back.
The solution to this is to find a different way to fund SMEs by using capital from sources other than the banks. Non-bank capital has already started to flow to SMEs via peer-to-peer business lending platforms, such as Funding Circle, where the majority of funding comes from individual investors. The introduction of the Innovative Finance ISA in April 2016 is a further incentive for these investors to earn tax-free returns.
However, it is unlikely that retail investors, on their own, will be able to provide sufficient capital to fill the funding gap, mainly because financial advisers and discretionary wealth managers are not yet participating in a significant way. This is especially true for SMEs looking for strategic capital of more than £250,000.
The real solution to directing much larger flows of new capital to SMEs is via institutional investors who control billions of pounds of investments. This is an area where ThinCats has specific experience and has the expertise to facilitate the process.