Show me the money

Where to go for financial support for a start-up?


Skin in the game

Angela Jameson asks whether the big lenders are willing to help small businesses and meet their demand for one more time.

Sarah Brown had been trying to get financial coverage from HSBC for about a year for her firs business.

She is now the founder of the Pai Skincare company that sells skincare products to people with sensitive skin. They had been trading for 2-3 years before asking for a loan, having invested personal £15,000 before. The loan they were asking for was only £20,000 while making their beauty products in the garage. The situation wasn’t the best, even with the usage of the government’s enterprise finance scheme.

Since then the business went up, partially due to a great bank manager who took a close look at the project and decided to help.

Pai received a second loan, for £70,000, two years ago and a third this year, for £210,000, plus a further £100,000 through equipment finance.

The third tranche of money has enabled the company to supply Fortnum & Mason in London and Le Bon Marché department store in Paris, as well as investing in manufacturing facilities, development team and sales staff.

The company has five years of profitability behind it and made £2.3m of sales last year. “Five years ago banks wanted to make sure that businesses could afford to pay back their loan. It is easier now, but we have made it easier for ourselves by remaining profitable,” Brown says.

The big five banks

Barclays positions itself as a bank for companies large and small, but it is also keen on the fintech sector and recently announced a £100m fund to help fast-growing tech businesses reach the next level. Its 15-week accelerator programme tries to find the fintech stars of the future, with bases in London, New York, Cape Town and Tel Aviv.

Gross lending to small and medium-sized enterprises rose by 60% in the first six months of this year, reaching £2.7bn. Gross lending for 2014 in total was £3.8bn. Barclays provides customers with mentoring and practical guidance. The bank has free growth clinics and last year helped more than 112,000 start-up businesses. Start-up business accounts are free for 12 months. The bank also offers “pre-assessed” overdraft facilities and loans for small businesses, which help them know that funding is available if needed. More than 300,000 small firms have used the service.

Rebecca McNeil, head of business lending at Barclays, says cautious business customers have been building up deposits in recent years and are wary of borrowing. “Looking ahead as confidence returns to the market, we anticipate this build-up of deposits will eventually shift, as businesses start to think about how borrowing can help their business to grow.”

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