As the Bank of England warns about tightening wholesale finance conditions, data from online invoice trading platform MarketInvoice has indicated that larger companies have now started to look for alternative means of short term working capital funding. The online invoice trading platform for growing SMEs, saw a record month in December 2011 with over £1 million channelled to 50 registered companies. This takes the total volume of finance channelled to SMEs via its online platform to over £3.8 million, just 11 months after MarketInvoice launched in February 2011.

Over 100 invoice auctions have been successfully funded since launch, with capital coming from institutional investors, family offices, asset managers and high net worth individuals. The largest single auction of £334,000 was successfully closed in the last month, with the funds for this auction being provided by a pool of nine professional investors simultaneously.

SMEs are still finding it difficult to raise working capital in the current economic climate, with last week’s Bank of England Credit Conditions Survey indicating that in the three months to December 2011 the availability of credit to small and large businesses largely remained unchanged from the previous quarter. The report also revealed that where traditional funding is available to SMEs, it is increasingly expensive and its terms are onerous which results in it being less effective as a tool to help owners run and grow their businesses during these tough economic times. Against this backdrop, in the last three months alone, data from MarketInvoice has indicated an in increase in the average size of companies wanting to make use of the invoice auction platform as a complement to traditional funding lines. These businesses come from a wide range of sectors, and, with revenues between £10 and £25 million, are all seeking balanced growth out of the recessionary environment. .

Anil Stocker, Co-founder and Director of MarketInvoice says: “Invoice auction volume is growing hugely at the moment, and the companies that are looking for alternative forms of short term funding are coming from diverse UK business sectors, including services, manufacturing, and construction, as well as many UK exporters. Interestingly, over the last few months we have seen a shift in the size of companies looking for short term funding, with an increasing number of larger companies looking to raise flexible capital when they most need it. With traditional methods looking increasingly expensive and onerous, and smaller businesses also struggling with late payments as their customers often now take between 60 to 90 days to pay their invoices, we expect this trend to continue well into 2012.”

“Importantly, the Coalition Government is beginning to take notice of next generation finance platforms such as MarketInvoice with Vince Cable recently announcing an industry-led taskforce which will examine the challenges business owners face in diversifying their finance sources, especially in looking beyond traditional bank products.”

The Co-operative Bank is to expand its network of banking centres across the country.

The bank has opened a new Corporate Banking Centre in St Albans and another will open in Guildford before the end of year, taking the overall number nationwide to 22. This follows a doubling of the centres from 10 to 20 since 2007.  

The expansion is a key part of its intention to grow its relationship-based approach to commercial banking and it plans to increase its presence further in coming years.

Since 2007, the bank’s commercial lending balances have grown by more than 40 per cent, including £500m specifically to fund renewable energy sector projects.

Deposits from business customers have more than quadrupled from £1.4 billion in 2007 to £6.7 billion by June 2011. 

Keith Alderson, managing director of corporate and business banking at The Co-operative Bank, said: “Throughout a period when many other banks have scaled back support to business customers, we have not just maintained our support but stepped up our commitment.

“The rate of growth in our customer numbers, lending and deposits shows how the Bank is now challenging traditional providers.  A focus on high levels of service, built on developing long-term supportive relationships is resonating with businesses at a time when they really need support from their bank.

“We are continuing to invest to improve our future capability and scale so that we can offer an even better service to a wider range of customers.

“At this time, more than any other, businesses need guidance, advice and the support of their bank whether they are seeking new opportunities to grow or dealing with challenging economic environment.

“And as part of The Co-operative Group we are in a unique position in the market to offer customers access to a broad range of services and expertise spanning sectors from legal services to pharmaceutical care.”

 

Following the credit easing initiatives announced in last week’s Autumn Statement, new research from borro reveals that small business owners have been locked in a capital battle which has resulted in lost opportunities to grow their business. 
Almost a quarter of SME owners (24 per cent) say they have missed out on a growth opportunity due to a lack of accessible finance. One in 10 (11 per cent) small business owners have also said that the inability to raise cash has even made them consider closing their business.

With bank confidence still at an all-time low, small business owners have turned to their personal funds to boost their businesses. Over half (57 per cent) of small business owners have used their personal funds to inject capital into their business and 17 per cent have asked friends and family for additional funds. With over 70 per cent of borro’s customers being small business owners it is not surprising that 16 per cent of SME owners have also used their personal assets to secure finance over the past 12 months.

Two thirds (66 per cent) of small and medium sized business owners  lack confidence in their bank, and are unsure of whether their bank will lend to them. As a result only one in five (19 per cent) of SMEs have attempted to secure bank finance for their business in the past year and only a third (31 per cent) of this group have been successful in securing the finance in full.

Over two thirds (67 per cent) of small to medium sized business owners believe that banks should relax their lending criteria as those seeking finance are denied due to credit checks and not fitting the lenders profile.

Paul Aitken, CEO of borro, commented: “A dramatic shift is needed for smaller business owners to feel they can gain access to much needed finance. While some of the initiatives introduced by the Government may ease the capital battle that has taken place over the past year; there is still a demand for small business owners to access finance quickly. This may be to ensure the business is able to take advantage of growth opportunities or address cash flow problems before they escalate. Our research demonstrates that this demand is not being met by banks and other traditional lenders.”

 

Debt held against UK commercial property fell again during the first half of 2011 as the property finance market continued to show resilience in the face of global economic turmoil and stagnant UK growth.

The influential UK Commercial Property Lending Market mid-year report by De Montfort University, published today, found that the value of outstanding, on-balance-sheet debt fell from £208.4 billion to £201.3 billion in the six months to June 2011, a reduction of 3.4 per cent.

However, it also delivered a stark warning of the scale of the challenge facing property lenders, revealing that around a half of this debt, in a range of £85 billion-£114 billion, could not be refinanced on current market terms and that one quarter was secured on a loan-to-value ratio of more than 100 per cent.

The study, the largest of its kind to look at UK commercial property debt, estimated total UK debt of between £280 billion and £292 billion at mid-year 2011 (down from £288 billion to £298 billion at the end of 2010) including £46bn outstanding in the CMBS market and an estimated £19.9bn held by NAMA – Ireland’s “bad bank”.

This continued the measured reduction in debt seen during 2010 that has so far avoided a fire sale of property assets and a collapse in capital values. Report joint author Bill Maxted said the “process of deleveraging continued at a modest pace during the first half of 2011″.

However, the report found that the uncertainty triggered by the deepening Eurozone crisis and the lack of growth in the UK economy had exacerbated the ongoing lack of liquidity and increasing costs of capital in the property lending market.

Investigating the loan-to-value ratios of lenders’ loan books for the first time, the report found that 41 per cent – 56 per cent, or £84 to £114 billion, of loans “may not be refinancable on lending terms available in the market at mid-year 2011″.

Falling investment values meant that one quarter of this debt (24 per cent) had a LTV ratio of above 100 per cent, while just one fifth (21 per cent) had an LTV ratio of less than 60 per cent.

Lenders have been willing to extend maturing debt on non-market terms, with £48.4 billion of these loan extensions recorded by the research since 2009.  Consistent with that, a recent FSA survey found around 33 per cent of commercial property loans, representing £66 billion, to be in some form of forbearance.

The lending market also continued to contract. Two-thirds of lenders (66 per cent) said commercial property was an asset class against which they were willing to lend, but the proportion intending to increase the size of their loan books fell from around half (46 per cent) to one third (35 per cent) at mid-year 2011.

Almost all of those willing to lend (64 per cent of respondents) would do so against a prime office property, compared with just 29 per cent for a loan secured by a secondary office.

And further regional disparities were also highlighted by respondents. London and the South East were seen as being in “recovery mode” while “recovery in the provincial markets could take six years or perhaps longer to achieve with much pain during this period” – a gap described as “enormous” and “unbelievable” by respondents.

Development finance remained challenging. Those willing to lend against a fully pre-let development fell from 52 per cent to 31 per cent, and those willing to lend against speculative development fell from 17 per cent to 15 per cent.

Bill Maxted said: “Lending organisations commented that the existing liquidity crisis had been made more acute by the problems of European sovereign debt and the unknown extent of contagion between banks.

“Respondents have suggested that only an increase in confidence in the UK economy, demonstrated by a number of quarters of sustained growth in UK GDP, would signal a recovery in the commercial property market in the UK.”

Liz Peace, chief executive of the British Property Federation, the leading body representing developers and investors, said: “These figures underline how critically important it is for government to use all of the tools at its disposal to help tackle this overhanging property debt.

“This means encouraging new debt buyers in to the market – something that we think reform of the real estate investment trust regime to allow the creation of mortgage reits would help to achieve.

“It also means finding ways to encourage new investment and spur economic growth. One easy way would be to stop charging full business rates on empty commercial properties, something that is a considerable disincentive for landlords who wish to invest in premises for small and medium firms.”

HSBC is participating in the Government’s Regional Growth Fund (RGF). The bank will receive £25million from the fund, which it will use to support small and medium-sized businesses in England that are recruiting new employees, to purchase assets such as machinery and vehicles.

HSBC is participating in the Regional Growth Fund, a £1.4 billion fund operating across England from 2011 to 2013. The fund supports projects and programmes that lever private sector investment creating economic growth and sustainable employment. It aims particularly to help those areas and communities currently dependent on the public sector to make the transition to sustainable private sector-led growth and prosperity.

The bank is creating an ‘Assisted Asset Purchase Scheme’ that will enable qualifying businesses, to receive additional funds of up to £500,000 to put towards the acquisition of assets, which would not be funded under normal commercial terms.

In order to qualify for RGF funds a borrower must be able to demonstrate that they will create additional employment, have a turnover of up to £25 million and that the asset purchase would not go ahead without RGF support. The Assisted Asset Purchase Scheme will provide a grant of up to £25,000 for each additional full time positions created by the acquisition of a new asset.

Jacques-Emmanuel Blanchet, head of commercial banking, HSBC UK said:

“I am delighted that the bank is participating in the Government’s Regional Growth Fund.

“HSBC is committed to supporting strong viable businesses and our Assisted Asset Purchase Scheme highlights this. The scheme will provide critical support for businesses that are looking to grow and recruit, enabling them to purchase the assets they need, to achieve their goals.”

Business Minister Mark Prisk said: “HSBC’s Assisted Asset Purchase Scheme will help SMEs that want to invest and create jobs – but that cannot currently access commercial funding. They will deliver a shot in the arm to local communities and help small businesses drive local growth.

“100 per cent of the RGF funding will be provided as grants to small businesses with the bank employing their regional network to administer the scheme for free.”

The cost of administering the bank’s allocated funds will be covered by HSBC. The £25 million of government investment is coming from round one of the Regional Growth Fund. Any interest earned on this investment will be used for further grants or returned to the government.