What is a non bank finance provider?

The question I hear all the time “So, when you say non-bank / alternative finance provider, what are you talking about, Gary?”

Okay so, first of all they are not shady guys lending in dark rooms where when you don’t make a repayment you have the heavies on your doorstep, as some seem to believe! In the strictest sense of the term, a non-bank lender is a lender who is not a bank, building society or credit union, but one that has its own source of funds and lends those funds out, sometimes with an added margin for profit.

Sources of the capital come from a wide range of channels, like highly sophisticated institutional lenders, European banks, family offices both domestic and foreign as well as peer to peer where funds are sourced from the general public (a great example of that working was Linked Finance attracted more than 1100 lenders on a €200k euro in a matter of days with a recent project) and of course pension funds. Also, a key player is the SBCI, probably the most important with them now seeking expression of interest to help get their working capital funds into Irish SME’s, exciting to see as it will be creating real competition on price.

In Ireland, there is a large number of alternative / non-bank lenders.  I don’t work with all of them, I work with up to 12 when required because I work specifically with 4 key finance products that service the vast majority of needs business have when they come to GDG Business Finance.

Debunking a myth – “Only businesses who cannot get finance from traditional sources are using non-bank providers”. Okay, in my opinion, that’s WRONG and I say this from a position of someone who has had exposure to the non-bank finance space for several years! The appeal of alternative lending to the Irish SMEs is determined by the ease of access to traditional finance and one that I am trying to help with, which is education on what is available. Ultimately if a business can source finance from their bank they probably will because of price however ISME Bank Watch Reports are showing that business believes this is becoming harder and more frustrating to access traditional sources of finance, not entirely because of their credit profile but lack of resources and overall experience of the application process is a big factor. Non-bank lenders are now competing on price and also there are products such as the merchant cash advance facility that are being provided through non-bank channels that the banks simply don’t offer, that’s key to remember. There are very bankable business using non-bank provides daily because of the speed of execution and overall experience.

Summary of Non-bank / alternative finance providers in Ireland.

The reality is that for the majority of the Irish public and the business owners, the relationship’s with their bank’s are not what they use to be, and it not going to get better anytime soon. Non-Bank finance providers have a real opportunity to step up and service a gap left in the market for SME lending.

In the short to medium term, both Brexit and COVID19 will make it more likely banks will pursue higher-quality borrowers and more restrictive lending conditions until the dust has settled on what impact both Brexit and COVID 19. Both have created uncertainty for many Irish private businesses and with more and more capital being made available from non-bank lenders is likely to fill a gap left by the banks to help Irish businesses to meet their immediate requirements and future ambitions.

Next week I will have 2 more videos on Tuesday and Thursday to share so excited for that. If you are a business owner/ appointed person in the business that manages the finance’s or indeed a forward-thinking accountant/business advisor who is working with Irish SME’s and would like to chat further on what I talked about in this video, send me a message and let's have a chat. Also, you can find out more on the website which is www.GDGbusinessFinance.com

I like to, and intend to finish all of these videos with a clear message and that is that the SME Finance market is evolving daily and I want to make sure your business does not get left behind.

Have a great week everyone.