Why the credit crunch means SMEs need to use a broker to find finance

The now famous credit crunch has been with us for more than twelve months. In that time, thousands of column inches have been devoted to the impact on the consumer and the residential housing market. But what is less well known is that businesses are also finding it increasingly difficult to raise much-needed funds; whether for expansion, property purchase or just help with day to day cash flow. And with SMEs being the driving force behind the UK economy – the impact of stagnation in th is sector is all too apparent.

Help at hand for Britain’s SMEs

But there is help at hand for Britain’s SMEs. Up until recently, free and fluid credit markets have meant money is, by definition, easy to get hold of and therefore (usually) cheap. Business owner managers have a good chance of being able to source a reasonable financial deal for themselves. However, in times of a market contraction, money is both more difficult to find, and more expensive. An experienced broker will know which lenders to approach for their client; although the ‘credit crunch’ does mean that even experienced commercial finance brokers are having to work harder than before to place deals as they come up against a constricted market with tightened underwriting criteria.

750 member firms

Commercial finance does not yet fall under the FSA’s remit for regulation and, because of the complexity surrounding commercial finance and the costs incurred by businesses who undergo the processes of centralised regulation, many of our members would like to keep it that way. All NACFB brokers must adhere to our Code of Practice and uphold its standards; and because of this they are more likely to have a professional approach to business and offer a professional service to their clients. The Association was formed by brokers who felt it was in the commercial broking industry’s best interests to keep their own house in order and the Association has a disciplinary procedure for any member who breaches the Code. From the initial membership of six member firms back in 1992 when the Association was founded, membership now includes over 750 member firms. But it isn’t just the Code of Practice which distinguishes NACFB members. The Association offers a training programme for those new to the industry to help them to do the job properly. Commercial finance does not start and end with a commercial mortgage; a broker should be aware that there are other funding options available – perhaps a leasing contract, or invoice finance arrangement – which might be more appropriate for the client. But the programme isn’t just aimed at just our members; we hope to be able to train and educate commercial finance brokers wherever possible within the sector. So by encouraging best practice among new entrants to the market, as well as encouraging our own members to diversify their skills and product knowledge, we hope our members are best placed to help the UKs SME sector in these tricky times.