Liberis raises £32m to accelerate ambitious growth plans

Liberis has successfully closed a £32m funding round in its largest equity capital fundraise to date. This investment represents the company’s first institutional equity fundraise and was led by FTV Capital – a growth equity firm with a successful track record of supporting high-growth financial services and technology companies. Liberis is backed by Blenheim Chalcot, the UK’s leading digital venture builder, who welcome FTV as co-investors in Liberis. This investment brings Liberis’ total debt and equity funding to over £150m.

Since its inception, Liberis has provided over 15,000 small businesses with more than £450m in funding of which the majority through its innovative Funding-as-a-Service platform with integrated partners. Liberis’ strategic partners, which include amongst others four of the world’s largest merchant acquirers, currently white-label its finance platform to offer funding to their own small business customers.

The last 18 months have seen rapid global growth for Liberis with expansion into five new countries including the UK, US, Sweden, Czech Republic, Slovak and Finland. This new investment will support the business as it further expands its footprint in the United States and in two new European countries, as well as attracting the best talent with a 30 percent increase in headcount planned for the next year. The investment will also enable the company to scale globally at pace through its unique partnerships model to support the millions of small businesses who have difficulty in accessing the funding they need to thrive.

Rob Straathof, CEO, Liberis, commented: ‘Small businesses are the lifeblood of the global economy, yet they continue to be turned away by banks and traditional lenders or faced with unhelpful repayment terms and complex processes. We are delighted with this investment from FTV Capital as it means we can continue to onboard new partners, expand our product range and grow our team in order to serve the 50 million small businesses across the US, Europe and the UK with much needed funding. 2020 is set to be an exciting year for Liberis and this financial investment will help to accelerate our plans so we can support thousands more small businesses around the world with fast, flexible and fair funding.’

Jerome Hershey, senior investment advisor at FTV Capital, said: ‘FTV believes the convergence of payment processing and small business funding presents a massive investment opportunity. Liberis’ differentiated distribution model offers a compelling value proposition for both its strategic partners and small business customers. To support a significant growth trajectory as it expands internationally across Europe and in the United States, Liberis can now leverage our Global Partner Network®, a group of leading finance and payments enterprises that have helped FTV portfolio companies for two decades. We are thrilled to be working with the company’s strong management team, and existing investors, to help them execute their vision.’

Manoj Badale, founder at Blenheim Chalcot said: ‘Rob and the Liberis team have built a great business with some of the world’s largest payment providers as strategic partners, and we are delighted to welcome FTV as co-investors. We look forward to working closely with them as we continue to expand its partnerships base and grow Liberis globally.’

To strengthen its global operations, Liberis has recently appointed general managers for both the US and Europe. Howard Kramen joins as general manager for the US, having previously led PayPal’s global credit operations. Kramen played an instrumental role in lending over $10bn to over 225,000 small businesses across the US, UK, Australia and Germany. Meanwhile Pedram Tadayon joins as Europe general manager and brings 20 years’ financial services industry experience to Liberis, having previously been CEO of Emric – a fintech provider in credit management, along with senior positions held at Nets, EnterCard and American Express.

Liberis also welcomes Jerome Hershey from FTV onto its Board. Having led OnDeck’s IPO as the Company’s head of business and corporate development, and with investing roles at Spectrum Equity and Technology Crossover Ventures, Jerome brings a wealth of knowledge and experience to Liberis and will support the organisation as it continues to grow its presence in the United States.

UK economy missing out on vital boost as SMEs stockpile £86bn

The UK economy is missing out on a vital boost as new research reveals small-and-medium sized businesses (SME) are sitting on £86bn of dormant cash in current accounts paying little or no interest.

Shawbrook Bank’s inaugural SME Savings Monitor reveals this is also causing smaller firms to miss out on billions of pounds in interest.

The research found that SMEs, which make up 99.9% of the UK’s 5.9 million firms, need quick access to 31% of their total cash reserves to cover the cost of day-to-day operations.

However, SMEs are actually holding an average of 57% of their total capital in current or instant-access accounts, rather than fixed-term deals that typically pay higher rates of interest.

Calculations carried out by the Centre for Economic and Business Research (CEBR) on behalf of Shawbrook reveal that this is causing SMEs to miss out on £4.2bn in extra interest each year.

Shawbrook’s SME Savings Monitor provides insight into the attractiveness of the UK’s cash savings market, looking in detail at interest rates, SME savings mix, the number of new accounts opened and SME’s savings ratio. It is also supplemented by a survey of 500 senior SME decision makers to examine how small businesses perceive and behave in the cash savings market.

It found that in the last five years SMEs have increased their cash reserves by £66 billion to £329 billion – equal to 14% of the UK’s annual economic output – suggesting that firms are treading cautiously in the current economic and political environment.

The latest figures from UK Finance show some £186.1bn of this money is being held in current accounts, which often pay no or little interest. This compares to the estimated £140.9bn currently being held in deposit accounts.

Further, the number of new business accounts opened has plunged 21% year-on-year in the second quarter of 2019 – the fastest contraction on record, analysis of UK Finance data reveals.

Interest rates remain low by historical standards which partly explains why SMEs engagement in the savings market has reduced. More than four in ten (43%) firms say higher interest rates would encourage them to engage more with savings providers and the products on offer.

However, a lack of flexibility and innovation in the products available also appears to be having an impact, with 35% of SMEs stating that the ability to choose a deposit term that suits their needs would act as more of a draw.

SMEs also called for a reduction in the minimum deposit size with 24% of firms identifying it as a potential barrier to engagement.

Julian Hynd, chief operating officer at Shawbrook Banks comments: “The amount of money SMEs are keeping in accounts paying little or no interest is indicative of the cautious nature of many firms in the current economic and political climate. While, of course, it is prudent for firms to keep some cash within easy reach to cover the daily costs of running a business, having too much money that is earning next to no interest – can have an adverse impact on finances.

“Small and medium-sized businesses are the backbone of UK plc and the savings industry needs to provide greater incentives to those firms to maximise the interest they receive on their cash reserves. Quicker access to better paying accounts, more innovative and flexible products and improved mobile and online services are just some of the ways providers can help tackle inertia in the market and encourage greater engagement from SMEs.”

Government’s support to business

Government could be doing more to ensure that its activities to support businesses are aligned and well-co-ordinated, according to the National Audit Office (NAO).

The NAO has published two reports today. The first, Business support schemes, looks at the management of the support government, particularly the Department for Business, Energy and Industrial Strategy (BEIS), provides to businesses. The second, British Business Bank, examines the impact of the British Business Bank on small-medium enterprises’ (SMEs) access to finance and its preparedness to respond to future challenges.

The NAO’s work has found that the support government provides to business is fragmented between different departments and often lacks overall co-ordination and prioritisation, which both BEIS and HM Treasury recognise needs to be improved.

The British Business Bank was set up by BEIS to help make access to finance interventions more coherent and it has had some success in this area. However, while it has an objective to act as a centre of expertise for providing advice and support to public bodies, it is not “the default” operator of government interventions. The report on the Bank says BEIS and HM Treasury should consider whether their statement in 2014 that the Bank would operate all national SME access to finance schemes across government still holds.

The NAO’s analysis of 10 schemes run by BEIS found that not enough was being done to understand which schemes are most helpful to businesses. Six out of the 10 schemes lacked measurable objectives and only one had a thorough evaluation of the scheme’s impact, making it difficult for BEIS to know which to continue with and which to stop. The report finds there are signs that BEIS is improving the set up and management of new schemes, but it is too soon to tell whether they have had an impact.

The British Business Bank, on the other hand, had clear performance metrics and carried out evaluation of its impact on SMEs. Overall, it has been performing well and SMEs have been growing as a result of its activities. However, the NAO says that this analysis will need to be ongoing as the value of many of the Bank’s interventions will only be known in the long-term and there is currently limited information on the cost-effectiveness of its activities.

Changes in the external environment could have an impact on the role and work of business support schemes and the British Business Bank in the future. With the UK leaving the EU, government may want to replace the support that businesses receive from the EU with its own initiatives – a task that will be made harder if central co-ordination of schemes is not improved. Several EU institutions also provide access to finance for SMEs in the UK, and the Bank may be best placed to take on some of these roles.

The Bank has considered how it might help SMEs in an economic downturn through increasing the availability of its products. However, while it could make some products available within weeks, it might be more than a year before businesses could access others. It is also unclear how the Bank’s contribution would fit within BEIS’s wider response to a downturn.

In the Business support schemes report, the NAO recommends that BEIS coordinate a review of its schemes to determine their strategic fit with the Industrial Strategy and changes required as a result. In British Business Bank, the NAO calls for government to set out more clearly what it wants the Bank to achieve as part of government’s wider support to business.

Gareth Davies, the head of the NAO, said:

“Government understands the importance of better co-ordination and coherence across the schemes it provides to business, but it still has some way to go before all the dots are joined up. More thorough evaluation of which schemes work best will help government plan and prioritise its support going forward.”

“The British Business Bank has performed well against its objectives. Government now needs to think carefully about the role it wants the Bank to play in the future, particularly after the UK leaves the European Union.”

British Business Bank responds to National Audit Office report

The National Audit Office (NAO) has today published a value for money study on the British Business Bank, in particular examining its impact on SMEs’ access to finance and its preparedness to respond to future challenges.

Commenting on the report, British Business Bank CEO, Keith Morgan, said: “We welcome the NAO’s findings that the British Business Bank has performed well against its objectives, enabling additional growth in UK SMEs as a result of our activities.

“The NAO has provided a robust evidence base, culminating in a balanced report. As well as being an independent assessment of the Bank’s performance and impact to date, the report is valuable to us in that it provides a clear set of recommendations to enhance our business. This helps ensure that we are best prepared for future challenges, and supports the Bank in continuing to deliver and demonstrate value for money. To this end, we look forward to implementing the recommendations proposed.

“Since its foundation five years ago, the British Business Bank has grown rapidly, and is currently supporting over £7bn of finance to more than 91,000 businesses. We have achieved this while generating positive returns for the taxpayer, delivering excess returns of £195m to the Exchequer to date and, as the NAO points out, maintaining current costs in line with industry benchmarks. The NAO’s report will help us build further on this track record as we continue to improve finance markets for UK SMEs.”