Financial advisers should be aware of potential customers that run small businesses and are looking for guidance on banking and borrowing services outside of traditional channels, according to Russell Gould, managing director at SME digital lender Everline.
Mr Gould told FTAdviser it is fundamental that advisers understand the full array of products available, following research which revealed that a declining proportion of SMEs are using ‘core’ products including loans, overdrafts and credit cards.
Independent research consultancy BDRC Continental’s SME finance monitor revealed that SMEs who use core products fell from 29 per cent in 2011 to 20 per cent for the first half of 2014.
The report also demonstrated more diversification in the types of funding used, with access to finance seen as less of an obstacle than it has been.
The Small Business Enterprise and Employment Bill also passed its second reading in mid-July and will now be considered in a Public Bill Committee. It will require banks to share SME data with alternative finance providers and force them to refer rejected SMEs to alternative lenders.
Recent research conducted by Everline found that 48 per cent of SMEs have regular cash flow issues and four in ten small businesses do not believe traditional lenders are interested in lending to them.
Mr Gould said: “The marketplace has changed, you’ve got lenders now with online application processes that take 10 minutes, with instant decisions and funds in your account an hour later.”
He admitted that Everline’s online lending service does not yet have a specific adviser channel for submitting applications, but urged IFAs to save time by suggesting online and alternative lenders.
“We’re coming into a market that has been dominated by the banks, so most small businesses are tied to a specific bank for transactional accounts, merchant facilities, commercial lending for properties and even personal accounts. It’s very much a monopoly, which makes it difficult for SMEs to look at other alternatives.
“This is where the adviser plays such an important part, because in the digital age we’re in there are whole new ways of doing banking, borrowing, merchant services, card transactions.
“So a good adviser needs to be up to speed on the whole range of things that are on offer for small businesses.”
He added that it is key for financial advisers to “think about where things are going”.
Mr Gould said: “I can see a future where a small business may not even use a bank to run their business, because there are other products which are better, cheaper, easier.
“The saving alone in switching your merchant services to one of the new cloud-based providers are massive, sometimes half the price.”
