With over 30 years in asset-based lending, John Onslow, chief executive officer at commercial finance provider Independent Growth Finance (IGF), is well placed to assess the UK SME market. He speaks to Christopher Marchant.
When Onslow became involved in the IGF Group in 2016, the average ticket size was £75,000 (€84,500). The average ticket size of current business is £540,000, and the average ticket size of new business is in the region of £1.7m.
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As to whether IGF intends to expand further over the next 12 months, Onslow says: “Our year end is March, so we finished the year with assets of about £100m, by the end of the first quarter we are up to £110m; by the end of the second quarter, we would expect to be £125m-130m, so it gives you a good idea of the percentage level of growth that we are experiencing.
“We really don’t expect that to slip in the next 12 months and we don’t expect that to slow down in the next two to three years.”
In August, IGF appointed an asset-based lending director for the Thames Valley region of the UK. As to whether this is part of a wider IGF strategy of targeting regional areas, Onslow says: “It is not enough to know the London employees of a company if you don’t know the figures in Birmingham, in Manchester, in Leeds. All the IGF sources of business span the country, and we need people on the ground to have those sorts of contacts and to get our story out there.
“In the next 12 months, IGF expects to have made hires in Leeds and Newcastle, as well as additional staff in Manchester and Birmingham.”
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By GlobalDataIn September, some of the financial services industry’s top bosses warned Chancellor Sajid Javid that the majority of UK SMEs remained largely unprepared for a no-deal Brexit. Senior bankers told Javid that while they themselves had made the necessary contingency plans should the UK leave the EU without a deal in October, many of their SME clients had not.
To an extent, Onslow is willing to echo this assessment by large financial institutions, and provides a case in point: “IGF has a client that exclusively imports from Italy, and as you can imagine they are very concerned about Brexit.
“When politicians talk about business being ready, often they are talking about the FTSE 100. For many of the SMEs that we deal with, it’s not a question of not being prepared or not caring, they just don’t have the firepower. They live day to day: they don’t have the money to put an additional six months’ stock in the warehouse and see what happens. It’s just not viable.”
As to whether this environment will lead to a rise in defaults in the asset-based lending sector, Onslow says: “It is difficult to make the absolute link. What the UK businesses are possibly in for is the perfect storm of Brexit and most leading economic indicators going in the wrong direction. With Brexit, you could be talking about full-blown recession; defaults will certainly increase for everyone.”
Caution over the overall marketplace contrasts with data in IGF’s Powering Freedom report, which shows that businesses are seeking 22% more funding than in January, 73% of business leaders expect growth in the next 12 months, and almost half (48%) expect double-digit growth.
In his summary of the SME lending market, Onslow says: “I find SMEs to be fascinating entities. There appears to be an obvious conflict between the huge percentage of business owners concerned with Brexit and almost as great a number that are confident they are going to grow in the next 12 months. Those two positions can be reconciled by understanding SMEs.
“SMEs aren’t standing still. They don’t always survive, yet it’s not unusual for SMEs to double their turnover in one year. SME owners are enormously optimistic as a group, probably because they have to be. Being an SME owner can be hard going and a lonely existence. One of the things IGF focuses on is appreciating the difficulties of owning your own business, because it is tough.”
Through leaders such as Onslow, the challenger banks such as IGF are becoming aware, not only of an increasingly unpredictable economy but of a market that needs to become ever-more receptive to SMEs seeking finance.
Just as growth has been at the backbone of Onslow’s career thus far, there may still be ample opportunities going forward.
