Brokers urged to provide more funding options to business clients

The report, which surveyed 1,257 firms with turnover of $1–20 million, also found that 77 per cent of those firms with expanding revenues said they were required to use personal assets as collateral for business growth.

Scottish Pacific chief executive Peter Langham said the report clearly showed that many businesses plan to introduce new products and services.

“But many SMEs seem unaware of the funding options – such as asset-based lending, including debtor finance and trade finance – that are available beyond the traditional secured overdraft,” he said.

Mr Langham told The Adviser that borrowers usually stick to traditional funding options because they are unaware of alternatives – and that it’s up to brokers to educate them.

“One of the big takeaways from this inaugural survey was the high proportion of business owners that are using their personal assets to secure business funding,” he said.

“The finance brokers are in a very good position to be able to sit down with business owners and say, ‘Let’s keep your personal assets out of the business equation’, which enables the business owner to build their personal wealth and not have their personal assets tied up to support bank facilities.”

Mr Langham also said that it is misleading to think of debtor finance as expensive.

“Expensive compared to what? If you want to take your house out of the equation then it’s certainly not expensive to have that peace of mind that your house isn’t at risk,” he said.

“If you look at dollar terms, it probably isn’t expensive – percentage-wise it might be, but for most businesses, in terms of the whole scheme of their business, borrowing costs are very low.”

[Related: Diversification equals dollars, say lenders]