It’s been a tough couple of years for Britain’s many micro and small businesses. Some were able to apply for a government grant to see them through the pandemic, and some could benefit from the furlough scheme. Many limited company directors found themselves in a tight spot, facing the “unrealistic” option of furloughing themselves, or burrowing into their savings to stay afloat.
That’s a lot of SMEs: they account for 99% of all businesses in the UK, according to a Simply Business survey. Covid-19 has cost small businesses upwards of £126.6bn, and 81% said they hadn’t had enough support from the government. The problem was that one-person limited companies cannot easily be assessed by the government because of complications around dividends, which leaves the door open to fraudsters (for want of a much stronger word). The end game is that many self-employed entrepreneurs went bust, while criminals reaped rewards.
There’s a lesson here about the financial system. It’s too easy to blame the government for every issue no one else wants to solve. Culpability for lack of financial education is in the hands of financial institutions (FIs). They have their part to play in ensuring customers know their options and have a simple way to action them. With figures on the rise for new entrepreneurs, the spirit of enterprise is strong, so there are ample opportunities to serve an eager audience.
Let’s consider business savings accounts. Many UK micro businesses dipped into their reserves to weather the pandemic. This was invaluable for those who had such an account, and were unable to get financial help elsewhere. These are pots usually set aside for business growth, for acquiring new equipment, new recruits, new resources, new training, and so on. Yet, instead of hard-earned savings heading in the direction of asset finance providers, the cash was soaked up to pay domestic bills, buy food, heat houses, and so on.
And there are many small businesses without a business savings account – more than you think. In fact, Shawbrook Bank statistics reveal that 38% of firms don’t put any money aside, with 20% not recognising any benefit in doing so, and 6% not even knowing how to start one. This has to come down to the customer experience of how businesses deal with asset finance providers, banks, building societies, etc. There’s an element of simple lack of education at play here, that the pandemic shone a spotlight on.
What are the opportunities for asset providers?
The simple solution is to recognise that customers need help, then help them. There’s optimism in the UK, with research showing that 77% of UK micro businesses expect activity levels to bounce back over the next 12 months as consumer demand rises.
We touched on this in a blog post called ‘Organisational change, technology platforms, and the future of asset finance providers’:
“People want to access finance more easily, faster than ever before, and usually online. A suitable technology platform provides the basis by which asset finance providers can offer uncomplicated, speedy services that can help businesses remain competitive. By emulating technology companies in adopting agile ways of working, and implementing the right tools to meet new working practices, asset finance providers can turn the tide and meet customer expectations.”
Embracing digital processes and enhancing how customers interact online (or via other digital means) is the key to success for an industry reliant on the success of Britain’s optimistic entrepreneurs. There’s a further opportunity for asset finance providers to make compliance processes more robust to prevent (or at least mitigate) fraud from occurring in the first place, and to get ahead of competitors.
A significant number of small businesses need help in going digital themselves, so they need someone to look to for help. Lloyds Banking Group found that only 12% of small businesses went online as a result of the pandemic. That’s jaw-dropping. It’s as if the internet hasn’t been around since the 1990s.
Constant finger-pointing at the government doesn’t work out well for anyone. The foundations are there for banks, building societies and asset finance providers to step up and become digital leaders, so that smaller firms can adapt, grow and flourish. Better them than the fraudsters.