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A Look Back: How SME Funding For IT Has Evolved

There is no underestimating the importance of small and medium-sized enterprises (SME) for the UK: the market is a key driver of economic growth and contributes greatly to the GDP. Statistics released by the Department for Business, Innovation & Skills (BIS) last year found that 99.9% of the 5.2 million private sector businesses are SMEs, which together represent an annual turnover of £1.6 trillion. SMEs dominate the industrial market and account for 60% of private sector employment.

Needless to say, supporting SMEs is vital for economic stability and growth; something which has been addressed by all key political parties in the run-up to May’s general election. For our part, we have been committed to this market since our inception in 1990, helping business to acquire the finance they to need in order to succeed and grow.

Obviously, the financing climate has changed a lot since our business venture began. Here, we take a look at how funding for SMEs has evolved over the past 25 years:

A brief history

At the start of 1990, and indeed through to the start of the millennium, businesses like our own were experiencing significant growth. In a recent article, Dr Khaled Sofani, Senior Teaching Faculty member in Finance at the University of Cambridge, attributes this growth to a range of factors: the end of the Cold War, the removing of financial regulations, and China gaining significant economic power.

There were also two more reasons. The first, of course, was the rise of the internet. The world wide web helped facilitate business-consumer engagement and for the very first time, businesses could reach customers across the globe without having to establish a physical presence in those countries. The second reason was that it was relatively simple for SMEs to acquire funding at the time which, as Dr Sofani states, was due to the fact that private equity funds and venture capitalists were both able to seek funding from financial organisations with ease.

During this time, the banking market was overcrowded with companies wanting market share. And, with credit being easily accessible for SMEs, they were able to grow and succeed, creating more job opportunities and boosting economic confidence.

Then everything changed

But then, the financial crisis hit and everything changed. Many banks and financial organisations went bust, or at the very least found themselves facing severe solvency and liquidity issues. Banks and other funding houses were forced to become far stricter in their lending terms; they became much more constrained and risk averse, making it increasingly difficult for business to acquire the funding they needed. According to BIS statistics, bank lending peaked during 2009 and since then, it has been declining year-on-year.

In the years that followed the financial crisis, there was huge uncertainty in the market. Aware of this, SMEs were holding off investment plans: in the six months leading up to February 2011, there was a 19% reduction in application value for small businesses applying for new term loans and overdrafts. A total 3% of SMEs at that time admitted to delaying borrowing because of the climate.

At times of economic instability, SMEs are at a significant disadvantage. Whereas larger companies are able to cut costs by doing things like limiting their services, losing employees or restructuring, this is virtually impossible for smaller businesses with little space to manoeuvre. Plus, cuts to alternative finance solutions during these times leaves small businesses increasingly vulnerable, as they often rely on short-term credit, loans and overdrafts for their day-to-day operations.

Today

Yet now, years on from the financial crisis, the economic climate has significantly improved, and confidence in the market is returning. SMEs have the tools they need to grow and succeed, and individuals that were perhaps apprehensive before now feel encouraged to begin their own business ventures. In fact, the number of SMEs has increased by 1.8 million since 2001, up 51%. And these businesses aren’t just confident in the market but in lending, too, with the government’s latest SME Business Barometer report showing that 77% of SMEs seeking finance last year thought they would be successful.

Despite the numerous challenges, the SME market soldiers on relentlessly. What is needed going forward is assurance by the government, banks and financial providers like ourselves that we are able to continue supporting this market in any way we can. SMEs are the lifeblood of the UK economy and we must ensure that their needs, both financial and other, are met.

Syscap is a leading provider of finance solutions to this market. If you are a small or medium-sized business, we are able to offer short-term business loans, finance for your new assets, and provide finance for your IT needs. Contact us today.

Syscap acquired by Wesleyan Group for IT financial products

Syscap, the UK’s leading independent finance provider, is delighted to announce its acquisition by mutual financial services specialist Wesleyan. This agreement builds on Wesleyan’s expansion plans by bringing Syscap’s expertise IT leasing and asset finance to the company’s formidable portfolio of financial products.

Commenting on the newly announced deal, Syscap Managing Director Philip White says:

“Syscap has always been committed to making decisions that will benefit both our customers and our business goals. This news means that the work we do in the professional and IT leasing space is now supported by Wesleyan’s strong list of personal and commercial finance services. We look forward to joining a group with a strong heritage and a keen eye for the future.”

The announcement follows Syscap’s recent commitment to the IT channel and comes in the lead up to the company’s 25th birthday.

Wesleyan’s Chief Executive, Craig Errington comments: “This is an exciting acquisition for us; Syscap is a strong, successful business that operates in professional markets very similar to our own.  They also have the same strong focus on quality specialist service, based on a real understanding of their customers’ needs.”

Bryan Jackson CBE, Wesleyan Chairman adds: “This acquisition is a clear intent of our desire to increase the range of services available to our customers while building on our existing capabilities.”

Syscap’s 69 staff will remain based in their current offices in New Malden and Northwich.

The move was facilitated by a fund advised by AnaCap Financial Partners LLP. AnaCap was advised by IMAS Corporate Finance with legal advice provided by CMS. Management was advised by Marriott Harrison.

Wesleyan was advised by Deloitte’s dedicated regional financial services team who provided lead advisory, transaction due diligence and structuring advice. The Deloitte teams were led by Darren Boocock, Simon Thompson, Richard Monahan and Peter Croom. Legal advice was provided by The Wilkes Partnership, led by Jeremy Parkin.

Top tips for a perfect pitch

This weekend is the Open Championship at the Royal Liverpool Golf Club in Hoylake, with 14-time major winner Tiger Woods and former world No.1 Rory McIlroy amongst the players hoping to make an impression. If they want to lift the Claret Jug they are going to need the perfect pitch.

Clearly natural talent is a big part in their success but practice also makes perfect. Even the most experienced salesperson needs to refresh their sales pitch. So take a look at our refresher tips to avoid hitting the bunkers.

Do your research

Before you pick up the phone or send the first email, you should be finding out as much about your customer or prospect as possible. Why waste precious meeting time asking questions you should already know the answer to? Remember to research the following and give your customer an individualised experience that shows you have done your research:

  • What is the company history and their current situation?Have you looked into their latest sales figures? Have they launched any new initiatives recently?
  • What are their key business issues?Sales people are expected to have a good knowledge of what the most important issues and challenges affecting their prospect’s business and/or industry are. Are they concerned about the actions of a competitor? Are newer companies taking too big a bite of their market?

Remember that a pitch is a dialogue, not a monologue

Received wisdom is that a salesperson should be talking 20% of the time and listening for the other 80%. Businesses don’t really want to know about your company or what you have to sell. They want to know why they should care about your product and how it will directly offer solutions and improvement to their own problems. It’s vital to connect the value of your solution to the needs of your buyer.

The more you listen to a decision-maker, and the more you ask high-value, thought-provoking questions, the likelier you are to identify what is important to them. It gives you the opportunity to show how what you are selling can help them accomplish that. Customers aren’t as interested in functions or features as real-world benefits and value. In the same way, they don’t want to feel like they are being sold to – the feeling of being talked to, rather than conversed with, could mean distant and defensive decision-makers.

Remember to follow through and follow up

If you’ve gone to all the hard work of recommending your product to a customer and they have shown an interest, why throw it away with sloppy behaviour? If a prospect asks for a certain piece of information that you promise by a certain time, stick to your word. If you aren’t consistent and reliable, a slow response before a sale will set off alarms bells about your aftersales attitude.

Similarly, be relentless with how you follow up after the pitch until you get a definite “yes” or “no”. A lack of a response doesn’t necessarily mean a “no” and the inability for a prospect to make a decision straight away shouldn’t put you off. Some even say that most sales aren’t made until the twelfth follow up. In fact, using these follow up opportunities gives you the chance to build a relationship with your prospects to really establish their desires and any hesitancies they might have.

Funding for IT investment jumps 9% in a year

IT leasing bucking overall trend of asset finance industry

IT investment through leasing in the past year totaled £1.5 billion, up 9% on £1.37 billion in the previous year*. Many businesses cut back sharply on IT spending following the credit crunch, leaving Britain’s business IT infrastructure crumbling.

The growth in asset finance for IT investment halts the overall trend of business investment through asset finance, which contracted by 1.7% over the same period, going from £22 billion to £21.7 billion. This is partly due to the withdrawal of ING from the UK asset finance market in November 2012.

The main reasons for  the rise in IT investment by businesses is the boom in the use of cloud storage, the increasing number of companies supplying tablet computers to their employees, and even businesses switching to Windows 8.

Investment in IT has impact on economic growth

Philip White, CEO of Syscap, comments: “Investment in IT by British businesses can be a huge catalyst for economic growth. It has a massive impact on how efficient and globally competitive UK plc can be.”

“Cloud computing has completely changed the landscape of data storage globally. Businesses around the world have moved hundreds of thousands of terabytes of data out of in-house storage to the cloud over the past few years.”

“That has driven a huge increase in demand for storage at third-party data centres. A lot of these cloud providers are investing heavily in storage, networking and security, as their clients become more comfortable with the notion of remote storage, and more willing to put sensitive data in the hands of third party providers.”

“The penetration of tablets into the workplace has also been a major factor in the increase in IT investment. A massive number of employees across financial services, professional services and the technology sector are now given tablets by their employers to aid their productivity. This comes with a cost that some businesses are choosing to meet through asset finance.”

“Even Windows 8, despite a difficult first year in the market, has provided some impetus for businesses to invest in new IT equipment.”

Asset finance to invest in IT has grown in popularity

The use of asset finance to invest in IT hardware and software continues to grow in popularity as many banks remain unwilling to write business loans to fund IT investment.

Explains Philip White: “A lot of banks lack the specialist knowledge to assess the long-term value of IT assets, meaning they are often reluctant to write loans to fund them. This means a lot of businesses have found that asset finance is a much better fit for their programmes of investment, as the specialists in the sector have a much keener understanding of how to assess the risk in lending against IT hardware and software.”

“Leasing allows businesses to bring their IT equipment up to date without impacting on cash flow, or adding to the level of debt they carry on their balance sheets. This frees up cash for the other vital investments businesses will need to make as the economic recovery gathers pace.”

Asset finance for IT investment by UK business, last two years*

Asset finance for IT investment by UK business, last two years*

* Year end October 31. Source: FLA