Revealed: How and why businesses review their funding
British businesses have revealed that cost and flexibility are the two most important factors when they review their existing funding facilities in the hope of securing a better arrangement.
The wide-ranging Funding Awareness Survey we conducted in April also found that existing bank managers are the most popular source of advice for businesses when searching for new funding.
In addition to gaining insight into the mindset of business owners, the survey aimed to discover how accurate funders’ perceptions of this mindset is in order to understand where – and how – the commercial finance market can better align its services for businesses of all sizes.
Cost and flexibility key
The survey asked businesses for the things they are hoping to secure when reviewing how their existing funding facilities compare against the wider market.
An overwhelming majority of 63% said that they were looking to reduce the cost of the facility. However, this was far lower than the 86% funders had expected, suggesting that cost isn’t everything when it comes to businesses’ interpretation of what makes a facility suitable.
Indeed, securing greater flexibility from their facility was important to 41% of respondents, more than the 31% looking to access additional funding. This came as a surprise to funders, who had expected more than twice that number – 66% – to be looking for more money when benchmarking their funding.
A further one in five were looking for a better level of service from their funder, while only 16% were after something more suited to their requirements.
Casting the net wide
Although the current bank manager is the most popular source of advice when it comes to searching for a new funding facility, it was interesting to note that businesses look much farther than this to secure the right solution.
Less than half (43%) go to their bank manager, while accountants and IFAs (35%) and independent finance brokers (26%) were also widely used.
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Businesses also rely on their in-house expertise (31%) and online research (21%) to find the most suitable facility for their requirements, with one in ten using price comparison websites and 9% checking out government websites to aid their search.
When asked what they thought businesses would say, funders had expected their search to be concentrated on fewer channels, with 73% going to their accountant, 67% their bank manager, 33% relying on online research and 22% using a finance broker.
What does it all mean?
It’s excellent to see that businesses are prepared to do their homework when looking for new funding.
While there will inevitably be those whose search begins and ends at the door of their bank manager, it’s so important to look further afield. Ultimately, they will only be able to offer what the bank provides and doesn’t always result in the most suitable option being secured.
Online research and in-house expertise should be used as much as possible to guide the search, but it’s also important to speak to independent experts like a broker or accountant to get their opinion on what might be best for a business’s specific requirements.
With so many different funding products existing nowadays, there may be specialist facilities that you hadn’t considered – or even heard of – that could be ideal.
This is also a major advantage when we look at the things businesses hope to secure when reviewing their existing facilities.
While some will still rely on rigid bank loans and overdrafts for a funding boost, the flexibility, additional funding and better service that so many crave can be achieved by looking beyond traditional products.
However, it is still a concern that cost is the most important factor for businesses. While the cost of any facility must of course be a consideration, it’s vital that a decision is not reached based on cost alone. Often, it is worth paying a little extra to secure the flexibility and service that can make such a difference to businesses in times of both struggle and prosperity.
We will be focusing on different aspects of the Funding Awareness Survey over the next weeks on our blog for an in-depth look at the findings. If you can’t wait to see what else was discovered, the full report is available to download here.