When flattery goes too far it can be a danger to us all

They say that imitation is the sincerest form of flattery. If that’s the case then we have just been handed one enormous compliment.
We are aware that there are various businesses offering versions of Pension-led funding, and we don’t have a problem with that. Quite the opposite actually, as more players in the space tend to grow the profile of this hugely useful yet poorly understood proposition.
And, as the overwhelmingly senior provider of this product we are even pretty relaxed when commercial rivals pinch a bit of wording here, a phrase there, and so forth. No harm done, the potential for the growth of Pension-led funding is so vast that there is plenty there for everyone to go at.
We do draw the line eventually, however, and a site we came across the other day doesn’t just cross this particular line, it crossed it, and kept going until that line was just a very small dot in the rear view mirror, rapidly fading to vanishing point.
You see, this (completely unregulated, obviously) site has taken a sizeable chunk of content from our own sites and rebadged it as their own. Hilariously, they have even taken the script of an interview I did to camera and refilmed it using my words and their guy! They even have the video of Vince Cable launching the Alternative Business Funding collaboration with a banner running over it claiming that they were founders of that particular initiative.
Founders? They are not even in it, let alone founders of it!
And much, much more. Needless to say we have real concerns.
Our problem with this has nothing, or certainly very little, to do with protecting our own intellectual property. We are grown up enough to look after ourselves. The real worry for us is that clients, and possibly also introducers, will be duped into believing that these guys are the real thing, and worth dealing with.
Now I don’t wish to sound harsh here, but a business whose entire marketing strategy is based on theft and deception is hardly likely to subsequently put the interests of its customers first once they have snared them. Most probably the customer/introducer experience will be a deeply unhappy and expensive one that would end up in complaints being made. However, as they are not regulated there will be no recourse.
In those circumstances it’s not just the customer who loses, its all of us. Introducers who may have been duped into recommending them, and Pension-led funding itself, could be tarred with the same brush. Indeed this kind of behaviour is a danger to the whole Alternative Finance community.
When you innovate, as we do, I suppose that fact inevitably attracts the short-term, get rich quick brigade. For all our sakes, and the reputation of the sector as a whole, all of us need to be alert to this stuff and stop it in its tracks when we uncover this kind of sharp practice.
It’s fair to say that in this case, we most definitely will.

Not the end of the road

Last month saw the publication of the Business Finance Guide jointly produced by the British Business Bank and the Institute of Chartered Accountants in England and Wales (ICAEW).

The guide, while being thought provoking and useful, can’t be considered comprehensive as it fails to acknowledge pension-led funding! However, that aside, it represents yet another good move from the government and specifically the work that Business Secretary, Vince Cable has been doing, in promoting access to finance for UK small and medium-sized businesses.

Launching this guide for small and medium-sized businesses, Dr Cable said: “The business finance market is going through a period of rapid change with challenger banks, peer-to-peer lenders and invoice financing gaining traction. But over two-thirds of small and medium-sized firms only go to one finance provider, so it’s important businesses know about the huge variety of options open to them.

[blockquote]“This newly-published free guide should be essential reading for all entrepreneurs and directors, and will play a key role in raising awareness of the different types of finance available to start or grow their business.”[/blockquote]

While the Business Bank doesn’t lend directly to businesses, it has significant firepower, and, according to the department’s figures, introduced over £800m into the marketplace over the course of 2013. With a potential £3 billion on offer over the next five years, the government anticipates leveraging this number to closer to £10 billion, an amount not to be sneezed at.

And yet the evidence shows us that the vast majority of businesses still rely on their bank to provide finance, and many of those, once rejected, seem to disappear off the radar. Missed opportunities possibly.

I believe that the most effective thing that Vince Cable and the coalition government can do for UK business is to make sure that the rejection letter is not the end of the road.

Mr. Cable’s Business Finance Partnership. Really?

“Small businesses struggling to access credit are to be given a welcome boost with £110 million of new funding, Vince Cable announced today.

The Business Secretary pledged £55 million of Government funding – through a scheme called the Business Finance Partnership – to peer-to-peer lenders and other finance suppliers. 

Match-funding from the private sector is expected to lever in a minimum of £55 million, making at least £110 million available to lend to small businesses over the coming years.”

So starts the press release from the Department for Business, Innovation and Skills released on December 12th 2012.

While the old saw holds that the “Devil is in the details”, unfortunately in this case the Devil is in the premise. In the very first sentence the release references the problem – small businesses struggling to access credit. The perception, fed from the general media, is that the main source of funding for business in the UK, the High Street Banks, have shut up shop and stopped lending at all.

Of course, this is nonsense. Banks lent more than £70bn to SMEs in the UK in 2011 and that number is expected to be near the same (or marginally lower) in 2012. In this context Mr. Cable’s £110m initiative represents approximately a 0.0014% dent in this requirement.

In fact if you add in the Government’s other funding programme, due to kick in a further £1.2bn for medium sized businesses, the total direct Government injection into the SME economy will stand at a measly 0.017% of the requirement.

No, the reason that many businesses are “struggling to access capital” is quite simply that lenders, all lenders, are being more careful to whom they lend depositors money. The raising of the lending criteria bar has had terrible and unintended consequences.

Many SMEs have just been through the most awful period of their existence and may have impairments in their trading history that simply make them very difficult to lend to in this climate. Unfortunately this situation will not be helped by the Business Finance Partnership, as Zopa, Funding Circle and the other selected recipients of these funds credit check in much the same way that a bank would and, I believe, are no more likely to lend to a businesses than traditional lenders on this basis.

These lenders will offer “average” rated firms loans at around a 10% rate of interest which, with base rates at 0.5%, seems attractive to the lender, but possibly less so to the borrower.

Now I will argue that any investment in UK SMEs is welcome going forward, and if the Government, ably represented by Mr. Cable, is going to open its ears to alternative methods of financing this critical element of our economy, then again this is welcome.

As a champion of pension-led funding, a bona-fide alternative source of business finance, I would simply urge Mr. Cable to get to grips with the real issues and then press on with many more of these initiatives.

Report card to date? Underwhelmed.