Banks too burdened by regulation to lend to SMEs – Bibby
REGULATION is crippling banks' ability to lend to small businesses, according to a rapidly growing financial services company.
Bibby Financial Services, an unregulated lender targeting the SME sector, said banks just can't lend to most small businesses because they are so burdened by regulation aimed at limiting risk.
The company, a relatively new player in Ireland's financial services market, launches its new Irish office in Dublin business park Sandyford today.
"There's a lot of bank bashing going on, but the fact is that these lenders are tied up by regulatory burdens like Basel 3 – so it's very difficult for them to lend to small businesses," said the company's European head Simon Davies.
The fact that Bibby FS is unregulated gives it "the freedom and flexibility to loan to small businesses, to price risk for customers with poor creditworthiness, which banks just can't do," he said.
His company has just rolled out a new insurance product in Ireland aimed at protecting small businesses from debt defaulters, an issue Mr Davies described as "endemic".
Its new offering provides small businesses with up to 90pc of what they were due to be paid in the event a trade debtor goes insolvent or otherwise can't pay their debts (though it doesn't protect against fraud).
Bibby FS launched in Ireland six years ago and now has 40 employees. It has 47 offices across the globe and is a subsidiary of Liverpool-based Bibby Line, a privately held conglomerate which has interests in everything from shipping to oil and gas exploration.
Until now the company's main Irish product was what it calls "full service invoice financing" – a type of payday loan for businesses, to carry them over until they get paid by debtors, though Mr Davies is hesitant to link the two concepts.
"We don't carry anything like the interest rates associated with payday loans," he said.
Demand for this product is high partly because of delays in the payment of invoices for Irish SMEs, Mr Davies said, as well as a shortage of bank finance. Surveys from small business lobby group ISME regularly find that average invoice payment time exceeds 60 days.
Bad creditworthiness is not necessarily a hindrance to getting a loan, he added. "We're interested in a business's growth rather than its past."
The company also offers a debt collection service for small businesses.