News

NACFB Commercial Finance Expo 2014: Visitors book now – don’t delay

Tungsten receives Prudential Regulation Authority approval

The Board of Tungsten has received approval from the UK’s Prudential Regulation Authority for the formal change of control in relation to the acquisition of FIBI Bank (UK) plc.

The fully UK-authorised bank will be renamed Tungsten Bank and commence offering supply chain finance.

Moreover, Tungsten has begun providing invoice discounting services to selected US customers.

Edmund Truell, chairman of the bank, said: “We look forward to an exciting future as Tungsten Corporation builds up a disruptive force in supply chain finance on a global basis.

“The combination of enormous flows of invoices, simple and transparent finance offers and high-grade credit risks should enable us to advance billions of pounds, dollars, euros and francs to suppliers on the Tungsten Network.”

Bank lending remains subdued for small businesses as lending contracts again

Commenting on the data released by the Bank of England on the Funding for Lending Scheme (FLS), Phil Orford MBE, chief executive of the Forum of Private Business said: “At -£0.7bn net lending to small and medium sized businesses is down on last year. The figures could be worse were it not for the extension of FLS, which increased the incentives for lending to small businesses in particular. The figures replicate the findings of the most recent SME Finance Monitor, which continues to show a subdued appetite for lending. At a sectoral level some of the decline in lending is down to reduced appetite to lend to the real estate sector so for the rest of the economy the picture is slightly brighter. At a time when the economy is picking up there is no doubt the figures remain slightly disappointing.

“Banks are keen to stress they have money to lend and the Forum of Private Business continues to urge businesses that money is there to borrow at present, either through the main or challenger banks, or through alternative sources, some of which are highlighted on the excellent Alternative Business Finance website.”

Businesses can protect against currency swings

The Financial Times recently reported on how swings in currency exchange rates have affected the earnings of multinational companies. Sterling and Euro strength over the past year has exposed companies – particularly European ones – to swings of up to 20% against some of the currencies most affected by currency exchange rate fluctuations over the last year, and companies have literally paid the price.

Carl Hasty, director of international money transfer specialist Smart Currency Business, has been warning companies of the danger of currency market fluctuations over the past 10 years, and agrees with this assessment. Carl said: “This is a very real issue, and the problem is particularly prevalent for companies dealing with emerging market currencies. As the Financial Times has pointed out, businesses are finding it too expensive and impractical to protect against fluctuations in these volatile markets.

“I’ve found that the root of the problem is often a lack of awareness. Many companies either aren’t aware of the hedging strategies that can help them to minimise the risk inherent in currency markets, or think that these strategies are too complicated or expensive to implement.

“One example is a forward contract, which lets a company lock in an exchange rate now for a future purchase. This helps the business to save money and minimise risk on their currency purchases, and allows them to set a budget rate, so that they have a better idea of how much they will expect to spend.

“There needs to be greater awareness of the range of hedging strategies that can help businesses on the currency front. These are never one-size-fits all. Businesses require education and support in order to determine the best strategies for their currency transactions.

“This applies to both SMEs and multinationals, and extends beyond emerging market currencies. There are still many businesses that are not aware of how much they can save on currency exchanges when hedging on popular currencies like the euro and US dollar – or indeed the difference any losses will make to their business if they are unable to address the risk.”

Jonathan Wooller provides a solution to the finance and funding barriers facing start-ups and SMEs

The key to success in raising funding is identifying the areas within the company where funding options could apply, and then providing a comprehensive solution specifically designed to meet those needs.

However, many people are unaware of the various options available, and these days there are several out-of-the-box solutions which also move beyond the traditional finance and funding offerings.

The information contained in The Finance and Funding Directory provides all the insight and information businesses require making a successful application for funding and covers:

– – Asset-based lending, factoring and invoice discounting

– – Leasing and asset finance

– – Commercial and corporate finance

– – Banking finance

– – Property finance

– – Trade finance

– – Bridging finance

– – Equity funding

– – Crowd funding and business angels

– – Mezzanine finance

– – Turnaround funding

– – Support organisations

– – Associations and professional bodies

Now in its fourth year, The Finance and Funding Directory is the essential guide to the financial resources available in the UK today.

Editor Jonathan Wooller said: “Following last year’s very successful edition which saw us sign up with Harriman House – the leading independent UK publisher of business, trading, investing and economics books – we saw, for the first time – our directory sold and distributed through the likes of Amazon, Kindle, iBooks, and many other well-known outlets, both online and in printed format. As a result, the FFD has been sold and downloaded to an audience of over 10,000 and we are truly delighted with the results.

“We have decided this year however to greatly extend the distribution of the directory by offering a completely free download of the FFD in its entirety – predominantly for the use of the professional community.

“Our target this year is to distribute in excess of 50,000 copies, which in turn will make us the leading directory and definitive source of information in the finance and funding market sector.”

For review copies, articles or comment, please contact:

Rebecca Bailey

Harriman House Ltd

[email protected]

Tel: +44 (0)1730 233 885

The Finance and Funding Directory 2014/15: A comprehensive guide to the best sources of finance and funding. Published in May 2014 by Harriman House, ISBN: 9780857194046, b/ePub, RRP: £19.99 available in all good bookshops.

Review copies are available on request

Latest SME finance monitor shows recovery on course despite decreased use of banks to fund growth

Despite positive signs of the economic recovery continuing to gather momentum, information from the latest BDRC SME finance monitor released Thursday, 29 May continues to highlight the Forum of Private Business’s ongoing concern that continued distrust in the banking sector may slow down the pace of recovery in the real economy.

Figures for the first quarter of 2014 show that economic conditions continue to be less of a barrier to business growth, with only 20% of small business owners citing the current climate as a significant barrier to growth (a fall of 12 percentage points when compared with the same quarter last year).

However, the report highlights the continuing slide in the number of small businesses turning to loans and overdrafts as a way to fund future business growth. A third of firms surveyed reported using external finance, while 30% of businesses questioned had looked to inject their own funds into their business in the past 12 months.

In addition, the most recent findings identified 48% of small businesses as permanent non-borrowers choosing to shun all forms of external finance to fund their future development. More importantly, over half of start-up firms surveyed (51%) planned to remain free of any banking restraints, suggesting a continuing long-term shift away from seeing debt-based finance as a key element for funding a new venture.

Commenting on the report findings, Phil Orford MBE, chief executive of the Forum of Private Business, said: “The latest figures from the survey show a continued fall in the number of businesses that see the economy as a barrier to investment, but a continued decline in small firms looking to outside sources for future funding.

“In 2011 51% of small businesses used external finance and 30% were seen as permanent non-borrowers. Today’s figures show a clear reversal in the number of businesses looking to the banks and other external sources moving forward. Although the continuing mistrust of financial institutions is understandable, it is vital that small businesses are able to take the opportunities that are presented to them and external finance should have a significant role to play in helping businesses fully realise their growth potential.

“The Treasury is looking at a key area of how to get more businesses approaching non-bank sources of finance, such as through the alternative business funding website. This is a great opportunity for businesses to look to finance growth through these new and robust alternatives to traditional bank finance.”

Legion Trade Finance joins the National Association of Commercial Finance Brokers

Legion Trade Finance (LTF) is pleased to announce that it has become a patron member of the National Association of Commercial Finance Brokers (NACFB).

The NACFB is the regulatory body for the Commercial Finance industry ensuring good practice and helping its 1,100 brokers to find funding for SMEs.

LTF is an independent financier of UK companies, helping SMEs to pay for goods from their suppliers both domestically and internationally. We structure innovative financing solutions bespoke to our clients’ requirements, including paying suppliers direct, loans and letters of credit. Our typical facilities start at £100k over the trade cycle, with no upper limit.

Adam Tyler, chief executive of NACFB said: “We are delighted that Legion Trade Finance has joined as Patrons and will be supporting our members. I would encourage brokers to visit their stand at the Commercial Finance Expo and find out more about their unique proposition. If your clients are sourcing goods and require finance to pay their suppliers, then LTF as Patrons of the NACFB offer a good option.”

Mike Yiannis, director of LTF said: “The NACFB represents brokers who are our most valuable source of new business, so we are pleased to be supporting them as a Patron. We work closely with brokers across the UK in delivering structured trade finance solutions to their SME clients, often in difficult situations. We now look forward to building on our key broker relationships and establishing new ones through the NACFB.”

The LTF team will be at the Commercial Finance Expo in Birmingham on 25th June, on stand A20.

More SMEs are profitable, half plan to grow, but no increase in appetite for external finance

BDRC Continental today publishes the twelfth wave of its quarterly SME Finance Monitor investigating the availability of external finance for the UK’s small and medium-sized enterprises (SMEs). The largest and most frequent study of its kind in the UK, research findings date back to the start of 2010 and are now based on more than 60,000 interviews with SMEs. The full report can be found online at http://www.sme-finance-monitor.co.uk/

Shiona Davies, director at BDRC Continental, commented: “The encouraging news from this latest research is that the economy is seen as less of a barrier by SMEs, more are profitable and almost half (45%) are planning to grow in the next 12 months. Looking forward, 12% of SMEs plan to apply for new or renewed facilities and they have improved confidence that their bank will agree, although the perception gap – between expectation of success and the actual numbers who get external finance – still exists. We are not currently seeing any increase in appetite for external finance, with most SMEs (72%) meeting our definition of a happy non-seeker of finance for the next three months.”

At-a-glance findings from the latest wave include:

Profitability: The proportion of SMEs reporting a profit has improved slightly in the last two quarters. 69% of SMEs in Q1 2014 reported making a profit in their previous 12 months trading, up from 64% in Q1 2013.

Risk rating: There has been a decline in the number of SMEs with a worse than average risk rating, down from 56% in Q2 2013 to 47% in Q1 2014. These changes were driven by zero employee SMEs, where the proportion with a worse than average risk rating has declined from 62% in Q1 2013 to 51% in Q1 2014.

Injection of personal funds: The proportion of SMEs reporting an injection of personal funds in the previous 12 months has declined over time. In Q1 2014, 30% reported having made such an injection. 15% said that they felt they had to inject funds. This proportion has declined somewhat over time from a peak of 26% in Q3 2012.

Use of Trade Credit: In a new question for Q1 2014, 27% of SMEs reported they regularly used Trade Credit. This increases by size of SME, and is more common amongst those with a minimal risk rating, and those also using external finance

– – 15% of SMEs use both external finance and trade credit in their business

– – A similar proportion (17%) use external finance but not trade credit

– – 12% use trade credit but not external finance

– – Just over half of all SMEs (56%), use neither external finance nor trade credit.

Use of external finance: 33% of SMEs reported using external finance in Q1 2014, the lowest level to date. The decline is across core forms of finance (loans, overdrafts, credit cards) and others. The decline in Q1 2014 is mainly due to the zero employee SMEs. Across 2013 one third (35%) had used external finance, in Q1 2014 this fell to one quarter (26%).

– – Including both injections of personal funds and regular use of trade credit boosts the proportion of SMEs using funding from 33% to 60%. The boost is more marked for smaller SMEs (zero to nice employees 31% to 58%, compared to 65% to 84% for those with 10-249 employees).

Almost half of SMEs are now permanent non-borrowers: Q1 2014 saw an increase in the proportion of SMEs meeting the definition of a permanent non-borrower to 48%, the highest level to date (30% in Q1 2012, 41% in Q1 2013). This is the first time there has been a clear gap between the proportion of PNBs and the proportion using external finance.

Eight out of 10 SMEs have been happy non-seekers of finance over the previous 12 months, while 14% experienced a borrowing event in the last 12 months (including the automatic renewal of overdraft facilities).

– – Eight out of ten SMEs (82%) met the definition of a happy non-seeker of finance in Q1 2014. The proportion of all SMEs that meet this definition has increased steadily over time, have been around two thirds of SMEs in 2012, and three-quarters in 2013.

– – Over time, the proportion reporting an event has fallen from around a quarter in 2012 to around one in six in 2013

– – 4% of SMEs in Q1 2014 met the definition of a would-be seeker of finance, who had wanted to apply but felt that something had stopped them. This has decreased over time from around 10% in 2012. The main reasons for not applying remain discouragement and the process of borrowing

Success rates: Two thirds (66%) of all applications made in the last 18 months resulted in a facility. Over time this combined success rate has fallen slightly, from around 70% in 2011. Renewals are consistently more likely to be successful than requests for new money.

– – Overdrafts: 72% of overdraft applications made Q4 2012 to Q1 2014 resulted in a facility. Success rates are relatively stable over time.

– – Loans: 55% of loan applications made Q4 2012 to Q1 2014 resulted in a facility. Success rates are relatively stable over time.

5% of SMEs are more reluctant to apply for facilities because of a previous decline by their bank: Of those who have ever been declined (6% of all SMEs), three quarters (79%) said that the decline had made them more reluctant to apply for finance. This is the equivalent of 5% of all SMEs who have been declined and feel more reluctant to apply for funding as a result. A quarter of the SMEs that met the definition of a would-be seeker of finance for the previous 12 months said that they were more reluctant to apply because of a previous decline (equivalent to 1% of all SMEs).

Looking ahead: Although it has declined from 37% at the start of 2012 to 20% in Q1 2014, the economic climate remains most likely to be seen as a major barrier for SMEs to run their business. For larger SMEs however legislation and regulation is now as likely to be seen as a major barrier.

At 7% access to finance is less likely to be perceived as a major barrier in Q1 2014 – the lowest level to date. This is also the case for those with any plans or aspirations to apply for finance in future (16% in Q1 2014, 27% in Q1 2013).

In the next three months most SMEs (72%) will be a future happy non-seeker of finance – this has increased steadily over time. Meanwhile 12% of SMEs plan to apply for new or renewed facilities

– – Of those planning to apply, 46% were confident that their bank would agree to their request, the highest proportion since the start of 2012 (52%)

– – Confidence the bank would agree is up (41% in Q3 & Q4 2013 to 46% in Q1 2014)

– – These confidence levels remain lower than the success rate for recent applications (66% for loan and overdraft applications made in the 18 months to Q1 2014).

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Awareness of initiatives: Half of SMEs (52%) are aware of any of the initiatives tested that offer help and support to SMEs, and this is stable over time. For Q1 2014:

– – Awareness of the funding for lending scheme has stabilised, at 27%, having increased steadily during 2013

– – 12% of all SMEs are aware of the appeals process – this has changed little over time

– – 17% of SMEs (excluding PNBs) were aware of crowd funding, with 6% either using or prepared to consider using this form of finance.

Over a third of online retail now via smartphones and tablets

– Mobile accounted for 34% of UK e-retail sales in Q1, up from 32% in the previous quarter

– – 48% of visits to e-retail websites are now via smartphones and tablet devices

– -Click-and-collect accounted for 14% of multichannel online sales during Q1

More than a third of all online sales are now made on a mobile device (smartphones and tablets) as m-commerce continues to increase its share of the UK e-retail market, according to the latest results from the IMRG Capgemini Quarterly Benchmarking.

The proportion (34%) is up from 20% in the same period last year and compares with just 1% m-retail penetration during 2010. In fact, the latest findings represent staggering growth of 3,400% in m-commerce penetration over the past 4 years. Visits to e-retail websites via mobile devices are also increasing, with around half (48%), now coming via smartphone and tablet devices. This compares with 30% in the first quarter of 2013 and 45% in the previous quarter.

Other key highlights from the Quarterly Benchmarking include:

– – Click-and-collect accounted for 14% of multichannel online sales in Q1, down from 16% in the previous quarter. This is in line with the trend recorded last year when the average reached 11% in Q1, down from 12% in the previous quarter.

– – The average checkout abandonment rose slightly to 36% in Q1, compared with 35% in Q4. However, clothing and apparel merchants recorded a significantly lower rate of 26% – unchanged from the previous quarter.

Tina Spooner, chief information officer at IMRG, said: “The latest Quarterly Benchmarking results highlight the increasing importance of m-commerce to online retailers in the UK. The widespread adoption of mobile devices is helping to drive growth in m-retail visits to a tipping point and, although growth in m-commerce itself is settling, this is unsurprising when we consider these results are coming off an increasingly higher base.

“The dip in click-and-collect sales recorded by multichannel retailers during Q1 is a trend we observed last year. We expect this figure to rise during the next quarter before reaching a peak during Q3, when consumers are often looking for immediacy in their purchases over the summer months.”

Chris Webster, VP, consumer retail and technology, Capgemini, commented: “These results illustrate just how integral a role mobile now plays in our shopping journey, and one which is only set to increase. Retailers have taken huge strides over the last few years, rapidly evolving their m-commerce platforms to match the expectations of their customers, enabled by the available technology.

“Where retailers once invested in m-commerce platforms to gain a competitive edge, such is the ubiquity of the technology, the playing field could now be considered almost level. Whilst click-and-collect has dropped slightly this quarter, in-line with recent trends, we can expect the delivery channel to become key to retaining brand loyalty as customers will shop around for greater convenience.”

Younger generations far more open to branchless and alternative banks, Accenture survey finds

Younger bank customers are nearly twice as likely as older customers to consider switching to a branchless bank and to consider banking with major technology players if those companies offered banking services, according to findings of a survey of nearly 4,000 retail bank customers in the United States and Canada appearing in two new reports by Accenture.

The survey found that 39% of customers 18 to 34 years old would consider switching to a branchless bank, compared with 29% of customers 35 to 55 and 16% of customers over 55.

The survey also found that significant percentages of consumers — particularly younger ones — would be open to banking with technology players such as Google, Amazon and Apple if the companies offered such services. Among consumers ages 18 to 34, 40% said they would consider banking with Google, 37% would consider banking with Amazon, and 34% would consider banking with Apple. Those percentages were 23%, 23% and 20%, respectively, for respondents age 35 to 54 and dropped to 5%, 7% and 6%, respectively, for respondents over 55.

According to the survey, overall 72% of consumers age 18 to 34 would be likely or very likely to bank with at least one technology, telecommunications, retail, or shipping/postal company that they do business with if they offered banking services. More than half (55%) of consumers age 35 to 54, and 27% of those ages 55 and older said the same.

Wayne Busch, managing director of Accenture’s North America banking practice, said: “Tomorrow’s consumer is coming of age with a very different perception of what a bank could be. Those expectations could become profoundly disruptive to banks if non-bank entrants gain momentum and banks fail to adapt quickly. This will have important implications for the digital generation spanning nearly all age groups.”

Emerging demand for money management, purchasing advice

According to the survey, younger consumers were also more likely than older consumers to want their banks to offer more services and solutions to help them with financial management and purchases. Specifically:

– More than half of respondents age 18 to 34 (55%) said they would like their bank to help with the heavy lifting of car-buying and provide discounts in that process, compared with 45% of those age 35 to 55, and one-quarter (24%) of those over 55.

– More than half of the younger respondents (57%), compared with 47% of those age 35 to 55, and one-quarter (24%) of those over 55, said they would welcome more help from their bank in the process of purchasing a home.

More than two-thirds of younger respondents (68%) expressed interest in receiving real-time analysis of their spending from their bank, including safe-to-spend forecasts, compared with 56% of those age 35 to 55, and 34% of those over 55. Among the younger group, two-thirds (67%) said such services would make them more loyal to their bank compared with 67% of those age 35 to 55 and 38% of those over 55.

Robert Mulhall, a managing director in Accenture Distribution and Marketing Services, said: “Banking is widely viewed as a purely transactional activity, but people are seeking advice and relationships that improve their financial well-being. In this digital era, the most successful companies focus on solutions, rather than products, to simplify their customers’ everyday lives. Banks also need to think this way.”

Juan Pedro Moreno, senior managing director of Accenture’s global banking practice, said: “Digital technologies are dissolving the boundaries between industry sectors. For banks, simply being more digital versions of what they are today will not be enough to assure success in the future. They will need to move beyond their traditional role as enablers of financial transactions and providers of financial products to play a deeper role in the lives of their customers – by applying digital technology in new ways and by offering tangible value and advice based on transaction information.”

“The Digital Disruption in Banking; Demons, Demands, and Dividends,” a North America banking report, and “The Everyday Bank; A New Vision for the Digital Age,” Accenture’s global digital banking point of view, are available for download on Accenture’s website here.