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Helping retail businesses to grow

With almost three million workers, the retail sector is the largest private-sector employer in the UK.

And while the retail landscape is dominated by the big supermarkets and department stores, there are still more than 300,000 individual businesses in the industry across the country.

Some 168,000 of these are small and medium sized businesses. If these firms are to reach their full potential, and continue to create jobs, many will need funding for growth.

The equity dilemma

Why do SME retail businesses struggle to access finance? Too often the lack of additional assets to offer to lenders as security prevents these businesses from raising further bank financing to develop their business. While banks can fund an amount that reflects the assets in a business, they can’t help if a business has no further assets to put up as security.

Unable to access additional secured funding, business owners often have to consider giving up equity to raise funds or they must agree to personal guarantees. Too many business owners face this equity dilemma. They must consider the difficult choice of scaling back their growth, diluting their ownership or agreeing to personal guarantees. This is a critical barrier to growth among SME retail businesses.

Unsecured funding for growth

Many growing firms need unsecured credit of between £500,000 and £5m. Businesses looking for loans like these are usually too big for peer-to-peer platforms but too small for banks and debt funds.

One of the benefits of unsecured lending is that it complements existing bank financing. This means SMEs can have both bank lending and growth funding. This means retailers can borrow from their bank or asset-based lender against the assets they have like invoices or stock. In addition, they can access growth funding in the form of unsecured lending.

Such a blend of funding can reduce the overall cost of financing, helping enhance growth potential.

How retail business access funding

Accountants and business advisors also have a vital role to play in helping SMEs access funding. In a world where high street banks provided all the credit, this was unnecessary.

However, with a larger number of non-bank providers now in the market, understanding the quality, reputation, suitability and cost of a lender has never been more important.

Our research shows that nearly two thirds (61%) of small business owners would expect their accountant to have a good understanding of all the finance options available.

In addition to their advice and origination, accountants also help SMEs to develop the business plans and financial forecasts that make the case for funding. The advice and expertise of an accountant or financial advisor is central to a successful funding outcome for the SME.

The demand

Proving the appetite for unsecured lending Ralph Coleman International was supported with a £4.25m loan.

Ralph Coleman International provides washing, storage, haulage and repair of plastic trays in the retail food sector. The funding enabled a management buy-in and gave the new leadership team the control they need to drive the business’s next phase of growth.

Many SME retail business owners are keen access funding to drive the growth of their business. But they want to do so in way that means they retain control of their business and support the funding they already have in place. When the UK retail industry supports as many jobs as it does, we need to do all we can to help it grow. We need to do this without making firms dilute equity or lose control.


By Dominic Buch, co-founder and managing partner, Caple

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