Funding for innovation: A guide for Midland’s SMEs – by Steph Brown

Steph Brown, Regional Director for the Midlands, provides guidance for innovation-led SMEs looking to fund that next big idea.

You can contact Steph here.

Innovation drives growth and fosters competitiveness among SMEs. From technological advancements to manufacturing, and breakthroughs in between, businesses are constantly seeking to innovate – whether that be to propel themselves forward or disrupt their market.

However, as they embark on the journey of innovation and business success, the challenge often lies in securing the necessary funding.

In today’s economic landscape, accessing commercial finance has become more complex for SMEs. A year filled with political and economic uncertainties, coupled with seven consecutive interest rate rises by the Bank of England has led to traditional high street banks reducing its appetite to lend to SMEs, even though the need for finance is as high as ever. Recent data from finance brokers indicates that 45% more SME applications for finance were rejected in the past month compared to the previous month. Borrowing criteria has also tightened and deals are taking a lot longer to complete. Yet, speed is vital for SMEs looking for funding to innovate at pace.

Innovation is not only restricted to entrepreneurs or businesses in the early start-up phase. Many established SMEs continuously generate fresh ideas, launch new products or harness new and current technology to propel their business to the next level.

These SMEs, built on creativity and innovation, require specialist advice and expertise from both brokers and lenders, working collaboratively to help these businesses secure the right funding and provide ongoing support when the working facility is in place.

To assist forward-thinking SMEs in navigating the funding landscape, we’ve compiled the following tips:

  1. Share key information

Plan ahead and come prepared to your initial meeting with your broker or lender. Bring a business growth plan, financial forecasts, and other essential data from the outset. This helps to demonstrate you not only have the correct mindset in place, but also your commitment to successfully create and grow a profitable business.

  1. Estimate cash flow requirements

If you are looking to use a revolving credit facility that enables you to withdraw and repay money as and when your business needs it, you will likely be drawing down, or repaying, different amounts from the funding facility over a set period. Your broker or lender will request that you estimate your expected cash flow requirements and anticipate any potential financial hurdles for your business over the forthcoming year.

  1. Be transparent

Transparency is the foundation of a successful partnership. It’s key that you build trust and credibility with both broker and lender, so that your business can quantifiably demonstrate – from the outset – that it can manage loan repayments.

  1. Communicate clearly

Lenders will always want to be confident that you’re on a consistent growth path, regardless of whether you believe you have that next big idea to completely disrupt the market. For your business to borrow in order to innovate, you need to clearly convey your ideas and expansion to both the broker and lender. Ensure they understand the market demand for your innovations and the potential job creation.

  1. Be honest about your funding needs

Many SMEs we work with need short term, flexible working capital to bring new ideas to market at speed, so it’s crucial to be honest with the broker and lender about the amount and timeframe of your funding needs. Not disclosing this information could lead to you getting the wrong advice and ultimately the wrong funding solution.

In today’s diverse and challenging financial landscape, a one-size-fits-all approach to lending simply won’t suffice. The SMEs have a responsibility to help the broker and lender get into the mindset of its business in terms of the short to long-term challenges it may face when borrowing.

Despite the hurdles in this market, there should be no reason why SMEs in the Midlands, cannot access the funding they need to innovate and unlock growth opportunities.

Providing SMEs the knowledge and strategies to secure the right financing, we can foster innovation and drive economic growth across the region.

This article was featured on Insider Media. You can read it here.