Banking on a switch

Craig Darling joins us on our next edition of our “Business Spring Clean” blog series. Here’s what he had to say…

Banking on a switch

How long has it been since you reviewed your business banking arrangements?  At Gilson Gray we recommend reviewing your lending agreement every three years or so.

Money comparison sites have done a great job in encouraging us to shop around for the best financial deals. Most people have saved money when it comes to home broadband, car insurance, even savings accounts – simply by shopping around.

But when it comes to banking, it seems to be a different matter.  In my day, you opened a bank account with whichever lender was offering the most incentives, and you stayed with that lender for life.

And the same approach tends to hold true with business bank accounts, which may seem surprising on the surface, but is perhaps understandable when you discover that some 50% of lending applications by SMEs are rejected by mainstream lenders.  It is certainly true that SMEs are finding it increasingly difficult to get finance because they don’t meet the requirements of the big banks in terms of access to funding. And often their credit score is less robust.

A good time to consider switching

As we gradually return to more normal operations following pandemics, war and cost of living crisis, now is a good time for SMEs to review their structures and financial requirements, and to consider renegotiating their banking terms or even switching lenders.

Traditionally, complacency and the ‘hassle factor’ has made business borrowers reluctant to make the switch.  The good news is that there is almost no hassle in switching nowadays and you could save your business a lot of money by negotiating more flexible lending terms.

Also, the lending landscape in the Scottish market has materially changed over the last 10 years with numerous lenders in the market.

New kids on the block

Alongside the High Street names, there are a host of alternative lenders competing for your business, including the so-called challenger banks, peer-to-peer lenders, fintech specialists, as well as household names such as PayPal and Amazon.

This is good news for SMEs as there are more organisations competing to lend to you, offering sophisticated digital platforms to make switching quicker, simpler and less intensive.

What is undisputed, however, is that alternative lenders are growing market share, so it makes sense to find out what they have to offer.  If your business operates in a specialist marketplace, you may find it beneficial to approach a lender who has experience and knowledge of your sector, and as they will better understand the value of your products or services and be prepared to lend accordingly.

Do your homework!

So it’s wise to do your homework and think about which type of lender is best suited to support your business.  Sometimes fresh eyes can identify gaps or weaknesses in your application, something that might delay you getting the green light, and that’s where Gilson Gray can help.  We have strong links with the banking and lending sector – traditional and alternative – and offer a number of services to support organisations keen to review their borrowing arrangements and secure a flexible refinancing package.

While the timescales for switching banks can vary, we have found that the majority of organisations can be switched over to their new lender within one month.  I think that this is wise investment of time given the potential for a positive impact on your bottom line.

At Gilson Gray we have many years experience advising business owners on financing their businesses and assisting them identifying and the putting in place the best type financing for them.  To discuss further please contact Craig Darling at cdarling@gilsongray.co.uk.