Tim Sawyer, CEO of Start Up Loans and one of our Small Business Decision Makers 2016, has been involved in business lending for close to two decades, and explained to Business Advice how the space is evolving including what he thinks needs to happen next.
Sawyer was part of the team that established Cahoot one of the first internet banks in 1999. Since then he has seen a number of changes in the market, for better and worse.
the lending process is much more robust today. When we started Cahoot it was quite slow we were struggling with things like address verification which we take for granted today, he said.
on the other hand, today business lending is much more impersonal it’s more about scorecards and computer-based decisions, which is something were trying to move away from with Start Up Loans.
His company deliberately takes a more personal approach, which Sawyer believes has contributed to its success at lending to very early-stage businesses. He explained: it’s only by actually going through the business plan with an applicant that you can spot mistakes, like people who have left out living expenses for the first six months.
This person-centred strategy also seems to provide part of the answer to the high rates of lending to female and ethnic minority business owners that Start Up Loans boasts with 37 per cent of funding going to women. But Sawyer also thinks that his company’s culture plays an important role in making applying for funding seem accessible.
I have never worked for such a well-balanced company before, he said. We have a roughly 50:50 gender split within our workforce helped by the fact weve looked quite hard at things like maternity leave which I think is really important in attracting female loan applicants.
getting a good gender balance is important for the startup economy because if you’ve got men and women with the same intellect and talent and only a small number of female business owners are getting funding, then that’s lots of create business ideas which arent coming to fruition.
It is a female-run company ClaudI & Fin which is Sawyer’s favourite success story of those companies that Start Up loans has helped. Started by two South-East London mums in their home, the yogurt lolly company rapidly went from the kitchen sink to being stocked in Sainsbury’s and needed funding to produce enough to meet demand when other supermarkets came knocking.
Yet despite his pride in such success stories, Sawyer is keen to highlight the importance of firms which stay small. Its much more interesting to talk about the huge success stories from the government point of view, but it is ok to be small, and I think that could be reiterated more.
most people we lend to will still be one or two person businesses in five years? time. But the way you end up with big companies is by having lots of small ones. So it’s micro firms, rather than unicorns and gazelles, that the government needs to focus on.
Sawyer thinks that the biggest challenge in the small business funding space now is around providing growth funding for such firms which are still seen as too small for commercial finance. There are enough startup loans now that if you’ve got a semI sensible business plan you can get money for it.
it’s the owners of firms that are two, three or four years into trading, that really struggle, he explained.
Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics as well as running a tutoring company.
Around 80 per cent of the businesses to fund on equity crowdfunding platform Crowdcube have less than ten employees at the time of seeking investment so if you're a micro business looking to raise finance, crowdfunding is certainly an option worth exploring. more»