The bank referral legislation, which will soon take a giant leap forward when the alternative funding portals receive designation, has shone a light on the importance of signposting small businesses to the alternative business funding sector.
Adam Tavener argues that although the big accounting firms are driving change in the profession, other firms need to embrace this new funding environment.
Accountants in practice are often called on to advise their small-to-medium-sized clients on a range of issues not always strictly related to the provision of accountancy services. This trusted adviser status has worked well for many years and can really strengthen the client relationship.
No area provides as many opportunities for excellence than the ever evolving field of access to finance for small businesses. And, with latest figures revealing that the UK now has a record 5.4 million private sector businesses, even more small businesses will be turning to their accountant for advice on business funding. Not so long ago a client asking for advice on this could reasonably be introduced to another bank manager, or maybe a firm providing factoring. A broker might possibly have become involved if a commission was warranted.
This is absolutely no longer the case. Strong support from the government and major shifts in technology have seen a host of new small business funding propositions enter the market, from the more mature offerings, such as pension-led funding, to newer entrants like merchant cash advances, performance bond guarantees, crowd and peer-to-peer funding to name but a few.
Happily, the technology that has played such a crucial role in the development of many of these funder offerings has also facilitated the development of some truly excellent aggregator sites which allow small business owners and, more importantly their advisers, to enter some basic, usually anonymous information and get rapidly signposted to the most appropriate funder for the needs of the business.
This algorithm-led process removes both bias and risk for advisers and ensures that the clients’ needs are always exposed to the widest possible range of options before being narrowed down – something that most advisers simply don't have the time or resources to deliver.
These aggregator sites can also help support one of the key issues highlighted by last year’s ACCA policy paper; a lack of financial education among small business owners. You only need to visit these sites briefly to see not only a short and understandable explanation of each funding option with supporting real life case studies.
The recent spate of strategic partnership announcements between the largest of the national accountancy practices and funding platforms shows that this is absolutely the direction of travel, and that these sites will become the new 'first port of call' for small businesses seeking finance in the future.
Adam Tavener is chairman of Clifton Asset Management and founder of the Alternative Business Funding (ABF) portal
