Customer education drives expansion at Independent Growth Finance

The recent International Asset Finance Network conference in London heard that while gross consumer lending by banks was up 72% between 2011 and 2018, with corporate lending up 48%, small business lending was down 13%.

In addition, the value of loan and overdraft facilities offered by banks to businesses with less than £2 million in annual turnover has fallen by a quarter since 2011, according to UK Finance.

Among the wealth of alternative funders looking to cater for this unmet requirement for SME finance is UK working capital specialist Independent Growth Finance.

In a bid to triple its loan book over the next three years, executives recognise they need to raise awareness of the role their core asset-based lending and invoice finance solutions can play.

Jon Hughes, commercial director at IGF (pictured), said: “There is a massive need for education, because many people still go only to their bank for borrowing. By growing our team and expanding our national footprint, we hope to support an increasing number of SMEs.”

IGF has been funding the working capital of growing SMEs since 1997 and works with businesses that have a turnover of £1 million-£100 million.

Earlier this year, it secured significant new senior lending provided by RBS, British Business Investments (BBI), HSBC and ABN AMRO Commercial Finance.

The senior finance facility follows additional recent investment from Spring Ventures, IGF’s private equity owner, to support its long-term growth.

This will maintain the momentum it has achieved during 2018, with its SME lending up 70% in the first three quarters of the year. It also completed seven asset-based lending deals during September, a record month for the company.

Hughes added: “The underlying opportunity for us is that banks have much more focused lending criteria and a lot of innovative businesses fall outside their parameters.

“Through asset-based lending and invoice finance, you are much closer to the way the business is performing, with daily visibility. Essentially, you have the heartbeat of the business in your hand.

“This allows us to be more flexible with our lending arrangements to ensure they suit our customers.”

New funding is only part of the strategy for IGF, with an influx of senior executives to support its ambitions, including Paul Edmeades and Neil Kindness as asset-based lending directors.

John Onslow, CEO of IGF, said: “This is an exciting time for IGF. For many businesses, asset-based lending can be the key to unlocking rapid growth without losing control of their business.

“In the coming months and years, we will continue to welcome new talent into IGF to help drive our asset-based lending solution in the UK.”

However, as the fast pace of growth continues, the potential impact of digitalisation sweeping through the finance sector will not be felt as swiftly.

Its close, one-to-one personal relationships developed with customers are designed to provide a unique perspective on each business to enable accurate lending based on assets.

The business now has more than 50 employees nationwide, including 35 at its office in Redhill, Surrey.

Hughes added: “We are always looking for opportunities to make the business more efficient and productive whilst providing the traditional relationship-based approach business owners seek.

“When you see someone running their business from their mobile phone, it is likely that they will find the industry’s way of operating somewhat antiquated. Invoice finance depends on the value of the trade debt as security but there are lots of ways in which the sharing of the data could be improved, to move away from transferring pieces of paper and spreadsheets that are then manually processed.

“In that sense, alternative lenders, including peer-to-peer lenders are shaking up the market.”

Despite this potential market disruption, its focus on personal relationships is securing the kind of key business wins that will underpin its expansion plans.

For example, it recently provided £1 million in funding to men’s clothing distributor M2C2 Group, which supplies 500 local independent menswear retailers on high streets throughout the UK and Europe.

M2C2 needed a funder that understood the seasonal nature of its business and long lead times; a business cycle can be up to 18 months.

During this period, M2C2 designs prototype examples to create a collection, presents them to its sales team and showcases to buyers to secure sales six to eight months before they are eventually distributed to retailers.

IGF provided M2C2 with a £700,000 invoice discounting facility and, as part of the wider asset-based lending package, £300,000 of inventory finance.

M2C2 chose IGF out of an original list of 12 different funding providers, with Neal Dawson, director of M2C2, saying: “We were not only looking for a funder that could provide additional cash to support our growth aspirations, but we also had an expectation around service levels and support.

“During the initial meeting with IGF, it was prominent that the team garnered a synergy, separating them from other funders.”

Edmeades added: “We took time to understand M2C2’s requirements to provide a bespoke funding solution that fits the needs of their business. An ABL package is useful to a business like M2C2, which has seasonal trading fluctuations or carries high stock value, to cover customer needs.”

This year, IGF also delivered a £4.15 million combined invoice discounting and asset-based lending facility to a major kitchen manufacturer.

The manufacturer, which operates in both the wholesale and construction industry, needed funding to support growth after securing new contracts.

IGF provided a £3.5 million invoice finance facility payment alongside an asset-based loan of £650,000 on company property.

Hughes added: “Asset-based lending requires detailed knowledge of the customer; this enables us to develop solutions that are cost-effective and uniquely tailored to each business that we support with funding.

“Our core skill is providing working capital and we will continue to be innovative and adventurous in supporting the success of our customers as we achieve our growth ambitions.”