Credit where it’s due
Commercial finance veteran Adam Tyler speaks to Peer2Peer Finance News about his time at the helm of an industry trade body, his new venture and why small businesses have never had it so good…
Adam Tyler lives and breathes commercial finance. Seconded from Nat West in 2005, he joined the National Association of Commercial Finance Brokers (NACFB), where he held the chief executive role at the trade body for 11 years. He is now embarking on a new venture, FinancemyBusinessonline, which helps small businesses find funding. But the lending landscape for businesses has changed greatly since he began at the NACFB, he explains.
“If you go back to 2005, it was a traditional market with a set number of lenders,” recounts Tyler. “Then we had the hiatus of 2008-9, when we lost most of the lenders we had at the time, which gave rise to the birth of all the new funders and lenders and all the innovation we have now.
“I’d say that change was brought about because of the recession. So what we’ve got now is the widest choice of lenders to businesses that we’ve ever had and the most innovation we’ve ever had in terms of small-business lending.”
Small- and medium-sized enterprises (SMEs) looking for funding have never had it so good, according to Tyler.
“Without a shadow of a doubt…it’s the best market there’s ever been for a small-business owner,” he affirms.
“There’s so much choice. I received a call today from somebody who’s had two offers of a £150,000 unsecured loan. They asked me if there is a better place to borrow from as they don’t feel as though they’ve scoured the whole market.
“£150,000 unsecured 11 years ago would have been so difficult to source. Now they’ve got two different places they can go to and can look to see if there’s a better option.”
There are now a plethora of finance options available for SMEs, including alternative sources of finance such as peer-to-peer platforms. Tyler says he believes this is due to lenders recognising that they need to innovate to compete and that they can lend more money on an unsecured basis if they do better due diligence on the business.
He explains that instead of insisting on security and personal guarantees, they have become more sophisticated in their approach and understand businesses’ affordability better.
It is not only the lenders on the market that are providing more variety these days, but the small businesses themselves, he adds.
“I think the market’s evolved because it’s had to,” asserts Tyler. “The small businesses out there don’t necessarily have the same backgrounds they used to. A traditional small business owner might have lived in a big house somewhere and had very little mortgage.
“Nowadays, the small business owners don’t have all that security behind them. They come from different backgrounds and perhaps they’re younger than they were in the past.
“Therefore the lenders have had to adapt to cope with the new-look small business owner that’s out there.”
FinancemyBusinessonline was launched in February this year to address this growth in the number of SMEs in the UK, many of which struggle to obtain financing from traditional lenders. Around 100 finance providers have registered with the site, including P2P lenders RateSetter and Funding Circle.
“85 per cent of small business owners still go to the high street bank as their first port of call,” explains Tyler. “High street banks can’t help everybody and if borrowers are turned down they may become disillusioned, so not employ more staff, nor buy a new piece of kit, nor get bigger premises. That’s no good for the small business owner.”
The platform works as an aggregator for business finance providers, all who have been vetted using “a strong due-diligence process”, akin to the one at the NACFB, says Tyler.
“We need to make aggregating finance platforms mainstream, that’s the next phase now,” Tyler says.
“We’ve had P2P lending, now we have the aggregators coming to the market. So that’s the reason I’m behind it.”
Read more: UK SMEs face funding black hole after 2020
Tyler has spent two months signing up the right number of lenders to the platform, utilising his experience and contacts within the lending, broker and small business markets.
“All of the ones I wanted to sign up now appear on the platform or are going through the on-boarding process,” Tyler says. “I’ve launched into the SME market and I’ve signed up the first lead providers, which are target affinity groups.”
Tyler has arrived at an enviable position whereby finance providers are proactively contacting him to register with FinancemyBusinessonline. However, maintaining a balance is also important, he explains.
“I’ve now got to start to get the deal flow going to keep the lenders happy that are already on the platform,” he says. “As time goes on, obviously I’ll bring more and more lenders on when the opportunity arises.
“I’m seeing some people I haven’t met before and hearing some new ideas, so it’s been an education for me, it really has.”
Tyler reiterates industry sentiment when he states that the biggest challenge for lenders is finding borrowers. “The reason behind that is twofold,” he explains. “Firstly, it’s cultural that we still go to the traditional source of business lending. The other challenge providers will be facing is how to market themselves in such a wide fashion that they will reach every single small business at that moment in time when they want to borrow money.”
Small business lenders have a greater task on their hands than consumer lenders in terms of marketing, Tyler says.
“A small business owner will only look at the finance market when he wants to borrow money, simple as that,” he explains. “Small business lending does not have the same profile as consumer lending and that’s why it’s going to take a long time to get that message across to everybody.
“However, it’s accelerating. There’s a lot of people trying to make a lot of noise all on their own.”
Looking ahead, Tyler hopes to see the government do more to boost SMEs’ access to finance. “That’s the drum I’ve been beating in Westminster for the last seven or eight years and there are more people listening now,” he says.
“We probably haven’t got the same profile we had in [former Business Secretary] Vince Cable’s day, that’s for sure, but it’s certainly gaining momentum since Brexit.”
It is not just the government who needs to do more to support the sector, it’s down to the industry too, argues Tyler. “All of us need to raise awareness to small businesses that there is another range of lenders out there,” he says.
The commercial finance veteran is broadly optimistic about the impact of Brexit, saying it will “bring opportunity, without a doubt” for SMEs, but concedes that a possible slowdown in economic growth could hinder the market.
“It’s a confidence thing,” he says. “If Brexit affects the confidence of small businesses across the UK, they’re less likely to borrow and that’s the one unknown factor. We don’t know what’s going to happen. We need to be ready to cope with Brexit and part and parcel of that is access to funds.”
Despite the challenges, Tyler is upbeat about the future of SME finance in the UK.
“I spoke to somebody who’s just raised £100 and wants to lend to the small business market, asking if they can join my platform,” he comments.
“So we’re still seeing new lenders coming to the market and I think that’s going to continue. New lenders, more innovation and some consolidation as well.”