Here Be Dragons

There is no doubt that for good or bad one of the most public manifestations of entrepreneurial Britain is the Marmite-like “Dragons’ Den” on the BBC, now in its ninth season.

I’m sure that people may be surprised (as was I) to discover that the programme actually originated in Japan and that there are no fewer than 23 versions around the globe including Nigeria, Poland, Turkey and the Arab world. Each has a panel of well-known business leaders ready to pounce on the wide-eyed panelists’ business idea, either to maul it to death or to cuddle up to it, in order to secure the best possible value for themselves. It is certainly compelling entertainment.

But there is a sobering side to this entertainment. Entrepreneurs come into the den often sorely unprepared for that which awaits them.

How many times have we witnessed sweaty participants getting their turnover mixed up with their profits? How many times have we squirmed in shared silence as a simple question about their business hangs unanswered, like the sword of Damocles, above their head?

The fact is that many young businesses struggle to find finance because they are simply unprepared for the rigour with which they need to approach the formal description of their objectives. The Business Plan.

Any lender, any consultant will tell us that it all starts with a coherent plan. It shows lenders that not only has the entrepreneur got a solid idea, but that they have the ability to deliver the idea in a managed, organised and professional manner.

Over the years I have found that one of the areas where we help to add value to our clients, is in helping with the production of a business plan. Whether they go on to use pension-led funding, peer-to-peer lending or are approaching a traditional, High Street, lender the effect is the same.

A good business plan leads to a good conversation.

Fumbling for Lending

Of all the confusing statistics flying around recently this is one of the most troubling (here clearly described in the FT).

[blockquote]“After falling in February and March, net lending to private non-financial companies dropped another £3bn in April, pushing the annual decline back down to 4% after recovering earlier this year.”[/blockquote]

The statistics also reveal that repayment of loans to businesses have continued to outstrip new lending.

There is clearly some kind of black hole into which the Government’s well-intentioned Funding for Lending Scheme (FLS) is quietly disappearing. With the announcement that this under-performing initiative is to be extended until the start of 2015, one is forced to ask, why?

The provision of funds to the banks with an unholy quid pro quo, whereby the banks can borrow increasing amounts of funds if they lend to SMEs, is clearly not tasty enough for the nation’s lenders.

In fact, from what I can see, the only logic behind the extension of the scheme is to reassure bankers that there is not going to be an uptick in their borrowing costs anytime soon.

With base rates held at artificially low levels and the supposed flood of cheap money through the Government schemes such as FLS, one might expect the newspapers to be full of stories of business owners having to build new storage facilities to keep all the cash being thrown at them.

And yet this seems not to be the case.

We are, of course, operating in the most unreal of financial environments ever seen in this country. A great economic experiment to counter the effects of the Great Recession. Only in Japan and the United States have the authorities sought to suspend reality with greater vigour.

We all know how vital business confidence is to the overall economy; how business confidence is the un-seen driver of growth through investment. How easy is it for any business owner to be confident under the current circumstances?

And who can blame them?