Farms running their business as a sole trader or a partnership will be impacted by the proposed basis period rules set out by HMRC. This means…
By Ian Hughes
There has been two news articles released this week on the topic of ‘small business funding’ that have attracted my attention. Both of which have a FinTech angle to them, which is not surprising given it is ‘UK Fintech week’.
‘Big Business of Small Business’
Monday saw the release of an Oxford Economics report commissioned by Funding Circle entitled ‘Big Business of Small Business’. The report and the summary can be accessed here.
Among the findings reported are:
- Small business lending makes up a tiny proportion of banks’ overall balance sheets. In the UK, small business lending accounts for only two percent of banks’ balance sheets
- SMEs are responsible for 60% of all jobs in industrialised countries and 50-60% of GDP
- Since 2015 in the UK, lending to large firms has increased by 43% since 2015, whilst during the same period lending to SMEs has decreased by three percent
- When small businesses do access finance from their bank, it is typically on worse terms than those received by larger businesses, both in cost and the terms associated with the loans
- In the UK the total number of SMEs has increased by over 260,000 since 2015
In addition to the UK, the above trends also apply to US, Germany and the Netherlands.
A number of the report’s findings repeated above do not come as a surprise to me, and could arguably go some way to explain the growth of alternative finance through lenders such as Funding Circle and iwoca. But some of the language used in the report appears at odds with my colleague’s comments after his attendance at a recent Cornwall Lenders Forum, where the banks stated they were very much open for business.
Mark Carney, AI and Small business
Mark Carney this week stated at the Innovate Finance global summit in London that Artificial intelligence will make it easier for small and medium-sized businesses to access credit and further that:
- developments in fintech will open up access to credit for small firms, especially those with ‘increasingly intangible’ assets.
- new entrants to the SME banking market are “opening up new opportunities for more competitive, platform-based finance.”
- “AI-enabled solutions are increasingly important in fraud detection, as well as automated threat intelligence and prevention. There is also significant potential in credit assessments, wholesale loan underwriting and trading.”
Interestingly, Mr Carney also repeated a phrase that was issued by one of the partners here. Scott Bentley, at the recent Cornwall Lenders Event – “Consumers and businesses increasingly expect transactions to be settled in real time, checkout to become an historical anomaly, and payments across borders to be indistinguishable from those across the street..” And there was mention of Bank of England “changes already underway, such as the rebuilding of its real-time gross settlements system to allow smaller startups to use the Bank of England’s payment rails.”
Last year, the Bank of England launched a review of the future of the financial sector in the UK and how the central bank can adapt – the report is due to be published in two months.
Finance in Cornwall
On trend one of my clients drew down £75k from Funding Circle this morning… and recently I met with one of the high street banks who talked to us about their fintech offerings.
My colleague Andrew James has been working with others to pull together a range of speakers for this year’s Finance in Cornwall event – with coverage of Alternative Finance providers and I would suspect a mention of Fintech, AI and Open Banking; exiting times!