2013-05-25T17:07:22-04:00 Anil Stocker http://www.huffingtonpost.co.uk/author/index.php?author=anil-stocker Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Anil Stocker Good old fashioned elbow grease. tag:www.huffingtonpost.com,2012:/theblog//3.2230658 2012-12-03T07:45:29-05:00 2013-02-02T05:12:01-05:00

Anil Stocker http://www.huffingtonpost.com/anil-stocker/
Much progress has been made with consumer finance - British companies like Wonga, Zopa and RateSetter have all achieved footholds in the personal loans market. While Wonga's technological edge allows them to fund clients in less than 15 minutes, Zopa and Ratesetter's peer-to-peer (P2P) networks connect lenders and borrowers over the internet, efficiently matching risk and return. Also fascinating is the increasing fusion between finance and mobile technologies, with Sweden's iZettle - which allows merchants to take small payments via mobile and tablets - just recently launching in the UK this year and following the trail blazed by Square in the USA.

But much of the focus this year has been around small business finance. The UK banking sector is one of the most concentrated in the world with the top 5 banks dominating 85% of the market. Most services offered are exactly the same, with the banks fretting more about the state of their balance sheets than about launching new products. Nearly every day we read of the difficulties that entrepreneurs face in sourcing finance, from equity finance to start-up, loans to fund long-term projects, or the necessary working capital to keep business ticking over. But now the private sector is responding with new innovative solutions. Right across the funding spectrum tech-enabled solutions are laying the foundations for mainstream adoption - aiming to revolutionise business finance.

For start-ups looking for their first equity investors, rather than relying on the whims of friends and family, crowdfunding sites such as Crowdcube and Seedrs allow entrepreneurs to source small stakes from the general public, fans or even potential customers. While there was some regulatory scepticism over these sites and a fear that the public wouldn't part with their money in this way, 2012 has seen several projects being successfully funded - a stand out example being EscapeTheCity which managed to raise £600,000 in less than two weeks through Crowdcube.

For more established businesses, the change has come with new ways to source loans and working capital - alternatives to the traditional suite of financial products such as overdrafts, term-loans and invoice factoring. Now SMEs can join a peer-to-peer loan platform such as Funding Circle and source a 1 to 3 year loan from a wide range of investors. They can also use my company, MarketInvoice (£36 million funded to date), to obtain cash advances against invoices that take a long time to be paid by large end customers, allowing them to unlock the capital required to accelerate growth. Other models such as Borro allow wealthy Directors to raise cash against personal assets such as cars or a valuable painting, and newly established IWOCA allows Ebay and Amazon merchants to obtain small advances to fund stock purchases for their e-stores.

While all these companies were very niche players at the start of the year with low brand recognition, their steady progress has been tracked closely by the press as well as business commentators. Taken together, my estimates show that these alternative finance platforms will have channelled nearly £200 million to British SMEs by the end of this year, with MarketInvoice and Funding Circle channelling nearly £100 million between them alone. What's exciting is that this is only the start. Just as the internet revolutionised the way we think about retail, these next-generations platforms will completely change the way finance flows through our economy. Already 90% of companies that have joined MarketInvoice have used the platform repeatedly and report that the speed of funding coupled with flexibility makes it a no-brainer compared to traditional bank products.

The Government has been quick to recognise the scalability and potential of these new funding channels. In May of this year the Department for Business Innovation & Skills announced a tranche of £100 million to be deployed directly through non-bank finance platforms - a clear indication that Vince Cable and his team want to encourage greater diversity in the funding landscape. Further announcements from the Business Secretary outlined the creation of a British Business Bank which would work alongside these private providers, ensuring any Government funds are allocated efficiently.

Next year will see these new financial technology companies grow even faster and integrate deeper into business networks. There will be additional market entrants, offering new products and a few brands in each category will establish themselves more prominently. As with any market disruption it takes time to build trust with users and it will be interesting to see how the new models move into the mainstream, building on the early adopters who were willing to be the guinea pigs in 2012. As track record is established, you can expect more businesses to be referred to these online solutions.

Of course not everything will go smoothly - major changes like this rarely unfold without minor setbacks and new risks. 2013 will see an interrogation around security, fraud and default ratios on these platforms. Many of the companies are in unchartered waters and are constantly testing how they can build more secure infrastructures for their users. The banks will watch with interest whether these platforms can become profitable when operating at larger scales.

But ultimately, history has shown us before that technology can create radical change for good in dusty old industries; our financial services sector is certainly ripe for such change. Who knows, there might be a time when having to walk down to your local bank branch to convince someone to give you a loan is a memory from a bygone era. The world has changed, and access to finance is certainly catching up. However next year unfolds, I'm excited to be part of this revolution, in 2013 and beyond.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1863736 2012-09-09T05:33:48-04:00 2012-11-09T05:12:01-05:00

Anil Stocker http://www.huffingtonpost.com/anil-stocker/
Under Funding for Lending, the Bank of England will provide up to £80bn of cheap loans to banks, at below market rates, in exchange for them lending the money to households and small and medium-sized businesses. The aim of the scheme is to stimulate the economy by reducing the cost of borrowing; in Osborne's theory, this should increase loans to credit-starved businesses and households. It all sounds good, but will it work in the real world?

Having spoken to a wide range of contacts in business and finance, the answer appears to be a resounding "no." I am of the opinion that the government should help the economy by ensuring companies have a pipeline of work rather than endlessly subsidising the banks.

To give an example, on Friday last week, I spoke with the owner of a major construction firm. His business is huge, with a turnover in the hundreds of millions. Presumably, the price of loans dropping would make an impact for him? His response to me: he had no problem getting credit; the price that credit came at was not a concern for him. The real worry was about what his order book would look like in three months time. He didn't want to take on debt, no matter the price; he'd rather keep the cash he has on hand, so he could keep his business going in case that order book didn't fill up.

At the other end of the scale, I speak to the owners of growing SMEs up and down the country every day. Even in these smaller business, they aren't overly worried about their ability to get credit - new finance businesses like the one I run, MarketInvoice, have given them a plethora of options outside the banks. They don't mind the price that credit comes at - if they need credit for cashflow, there's no quibbling about 1% on the interest rate when failing to get a loan may mean your business can't keep trading. The problem really is that these businesses have access to credit but just don't want to use it. They see spending money, such as expanding their firm quickly, as a big risk.

In the current economic climate confidence is at an all time low. This is just typical of what I hear every day. If businesses small and large are determined to hoard cash, then the new loans - whatever the price - will not be taken up. As for those willing to borrow, many are so indebted that the banks won't lend to them anyway. Put simply, the creditworthy won't take loans and the uncreditworthy won't get them.

There must be a good reason why a business should take out a loan, not credit for credit's sake. Pumping credit into the economy doesn't solve fundamental problems; cheap credit leads us into other difficulties. Cheap credit keeps bad and uncompetitive 'zombie' companies in business. This is bad for the market. So what should the government do?

Last week Osborne announced that the Treasury was looking into setting up a Government-backed small business bank. Although the exact details have not been released it is said that the British Investment Bank would not compete with high street banks or take deposits but will have a strong private sector focus. It would be responsible for the plethora of schemes existing in Whitehall e.g. the Business Finance Partnership & Enterprise Capital Funds. This proposal has been welcomed by the British Chambers of Commerce, who are big advocates of the idea. The Chancellor has naturally come under attack by members of the opposition for, funnily enough, copying their proposal. Labour put forward a policy review discussing the idea of a British Investment Bank. Nicholas Tott, a former partner at the leading international law firm, Herbert Smith LLP, carried out the report that was released in July of this year.

My opinion is that anything set up to help small businesses acquire funding is a good thing however we need to look beyond just creating another bank that might become the next RBS, backed at the expense of the tax payer. Originally a small business bank was a Labour scheme touted in 2002 under the name: Regional Venture Capital Funds. It is not surprising that the new Labour report makes no mention of this earlier fund. It was a flop. Private sector cash was matched by the state coffers and ploughed into young businesses. £93 million of tax money was turned into just £5.9 million, a 93% fall.

I am worried that a state-backed business investment bank will crowd-out the market and stifle private sector innovation. This is very close to my heart, having co-founded an online finance firm it's frustrating to see so much money being pumped into the traditional lending sector - there's a real risk of great alternatives to traditional funding, tech finance startups, being side lined by subsidies on this scale.

If Osborne wants to win the next election - and he should, considering he is both Chancellor and the Tories' chief election strategist - he should adopt a plan that works. We've tried cutting our way out of the recession, and it hasn't worked. Thus, Osborne should swallow his pride and spend. Long-term investment is the key.

We have historically low bond yields thanks to the Bank of England's Quantitative Easing programme - the least Osborne could do is take advantage of them. He should increase borrowing to build big infrastructure projects like a new hub airport for London, a huge social housing construction programme, widening motorways, replacing our aging power plants with newer, cleaner ones and rolling out high speed broadband across the country. According to the Office for Budget Responsibility that Osborne set up, infrastructure projects are the most effective stimulus. Investing in education must also be a priority, as well as retraining for the long-term unemployed. This will create a more competitive and skilled workforce.

Even if George Osborne isn't convinced by the economics, he should be convinced by the politics of it. A stimulus will not only leave us with more jobs and more money in the economy, but also with a vastly upgraded country. Infrastructure is an investment in the future - what we build now will be enjoyed by future generations. His current plan is to print money and give it to the banks; wouldn't printing money and investing for the future be more effective?]]> tag:www.huffingtonpost.com,2012:/theblog//3.1723884 2012-07-31T11:26:08-04:00 2012-09-30T05:12:04-04:00

Anil Stocker http://www.huffingtonpost.com/anil-stocker/ unemployment in the Eurozone reaches an all-time high. Almost everyone I speak to in fund management or banking thinks some sort of collapse or seismic change of the Eurozone is likely. Only one thing is certain: no-one really knows where this will all end up.

As the owner of an online invoice finance business focusing on small & medium sized business, I've already had business owners - both importers & exporters - coming to me telling of fears with southern European suppliers, with a credit crunch hitting Greek, Spanish and Italian firms. These companies are already seeing a huge impact on their profitability and cash flow.

So what does this mean for your business, and what, if anything can be done to prepare for the unknown? There are a few steps you can take to safeguard your business and keep ahead. It makes more sense to try to work out your exposure now, not when the storm hits.

Even if your direct customers are not based in the Eurozone, if your key suppliers are based abroad, there are several knock-on effects to look out for. With supply chains now global, it's all too easy to think you are absolutely fine, only to discover that one crucial part of your product line requires, say, a circuit board that is manufactured in Italy, or insoles sourced from your wholesale shoe manufacturer based in Spain.

Of course, this might not mean the outright collapse of a supplier - but at a minimum, anyone importing or exporting should expect delays in payment from any client with any kind of exposure to the Eurozone. This has a impact on your own cash flow. If factories in Spain can't get loans from local banks, they'll ask you to pay larger deposits upfront, which means that you might be forced into bridging the funding gap until you get paid by your own customer (e.g. your large high street retailer who takes 60 days to pay you).

It's very important to work out your cash flow requirements and put contingencies in place - not if things carry on if they are, but just in case things get horribly, shockingly worse. In 2009, the car industry saw sales drop by 50%; the Japanese tsunami of 2011 led to major disruptions in global supply chains as specific parts became impossible to source. Do you think your business could survive the equivalent financial hit from Eurozone debt meltdown? If you have a plan in place, it makes this sort of thing much easier to survive.

It's still hard to predict the precise impact of the Euro crisis on banking and the real economy; but looking at the Lehman bankruptcy as a model, we would expect to see a freezing up of inter-bank lending as sovereign lending goes sour and banks have to take write-downs on their balance sheets.

You should be ready for banks to scale back quickly and stop supporting you - in 2008, when Lehman went under - almost all high street banks slammed the brakes on lending. Even now, after initiatives like Project Merlin, credit easing & the Chancellor's latest £100 million injection of cash into the banking system, loan rates have not returned to pre-crisis levels. To be prudent I would look into other ways to finance your business outside of the existing banking system, increasing your options in case your main provider decides to retrench.

Perhaps the biggest impact would be on trade both with the Eurozone and within the UK. Any escalation of the Eurocrisis would be sure to push the rest of Europe back into recession for 4-5 years at least. Even in Northern Europe, which would be least likely to be severely impacted, UK exporters would be hit by the weakening of the Euro as a currency.

British products would become more expensive to European buyers. Considering that over 50% of UK exports are purchased by European customers, maybe it's time to start thinking about shipping more to Brazil, India or China?

In short, regardless of your feelings about the EU, any sort of collapse in the Eurozone would be a disaster for UK businesses. Of course, those who are well prepared for a shock like this are most likely to survive and prosper in the aftermath. Let's all hope the politicians get their act together and solve this definitively.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1697819 2012-07-24T09:21:23-04:00 2012-09-23T05:12:09-04:00

Anil Stocker http://www.huffingtonpost.com/anil-stocker/
My contacts in the banking world tell me this news is still the tip of the iceberg. Over the next few months, more shady practices will come out. For example there is growing evidence that most mainstream banks were fiddling LIBOR.

As the co-founder of one of the new crop of online alternative finance businesses (www.marketinvoice.com) starting to challenge the banks, we would never have expected to be operating in such a climate of bank scepticism and banker bashing. What we are witnessing is growing doubt as to whether UK banks have their clients' interests at heart. One former Barclays Capital trader told the Telegraph this Saturday that "BarCap was the Wild Wild West", and that BarCap employees were told to sell hard to their corporate clients - "the thesis from up on high was that we should be making more out of them... we all had to find ways to squeeze more margin out of the same clients".

Considering how hard it is right now for solvent businesses to raise capital right now, and who are being turned down by the mainstream banks, you've got to wonder whether bankers prioritise opportunities to make a quick buck. I wonder how easy it was for the Mexican drug lord to open an HSBC account, and I wonder whether bank sales staff were very persistent when trying to sell hima complex derivative product, rather than green-lighting a higher overdraft?

Of course, while remarks like that raise a smile, they hardly reflect the nature of the problem. Mervyn King was right when he said the culture of banking needs to change; Bob Diamond was right when he said "the evidence of culture is how people behave when no-one is watching."

The trouble with banks is that they have become so big, they are hard to oversee, and internal corporate governance mechanisms aren't that great a tool to root out malpractice. Shareholders have only limited power over CEOs, CEOs have only limited control of senior managers, and senior managers can't be sure of everything their employees are doing. In fact, certain investment banks encourage a culture of autonomy (they call it "entrepreneurship") where whole teams can do what they want as long as they deliver bottom-line profit. Make money and we ask no questions.

That's why culture is so important. And why simple regulation and bonus cuts can't remove a cultural problem overnight - especially if implemented in a knee-jerk fashion. After the last banking crisis, a raft of regulation was brought in quickly, in an attempt to prevent 2008 happening again; in Europe, most notably, the Basel III banking standards emerged.

While these standards have lofty goals - attempting to make balance sheets safer and risk managers more cautious - which all sound good in theory, the truth is that often they have trickled down to hurt ordinary businesses on the high street.

For example, banks are pulling business overdrafts (seen as risky under Basel III), and replacing them with expensive, inflexible factoring lines. It's good for my business, which aims to compete with those products (like invoice finance), but is it good for society as a whole?

Equally, bank appetite for any kind of trade finance has ground to a halt, because Basel III marks exporting as uniquely risky. So, well intentioned regulation has created perverse incentives for banks - and the ordinary person suffers, as job losses come when otherwise healthy firms struggle to finance themselves.

Of course, how does a change in culture come about? Well, a properly funded public enquiry would be a good start. We can all see how the Leveson inquiry has altered the way journalists think about themselves; talk of "culture" in newspapers isn't just nonsense. The legal and medical professions have a regulatory council that oversees best practice and seeks to protect, promote and maintain standards in their fields. Is it time to give the financial ombudsman more powers and make it easier and more effective for businesses to report aggressive practices by financial services providers?

Until we see a proper judge-led inquiry, with all the characters from the backrooms hauled up to speak and account for themselves, people in the City will continue to play at the margins of any rules the regulators set, without thinking about the consequences. Politicians shouldn't jump the gun and regulate from the hip. Changing a deeply engrained culture will take time and the patient involvement of all stakeholders. Ultimately bankers have to believe that they have a positive role to play in our society.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1662323 2012-07-10T12:45:08-04:00 2012-09-09T05:12:04-04:00

Anil Stocker http://www.huffingtonpost.com/anil-stocker/ Britain's politicians should be standing up for the benefits immigrants bring, not demonising them.

As a keen follower of UK politics, and an aspiring entrepreneur, I was dismayed to hear Ed Miliband's speech apologising for immigration, but I can't say I was surprised. There seem to be a consensus on only one thing in politics these days; Labour and the Conservatives compete to sound "tough" on immigration, with the Tories still wedded to a farcical national cap.

I've got personal experience of just how farcical that attempt to enforce a cap is; as a businessman, I had the unpleasant experience this week of having to turn down the best qualified applicant for a job at my firm because of his immigration status.

This was mostly down to the Tories' badly-thought out tightening of visas for students who studied in the UK. Intended to crack down on visas issued by bogus academic institutions, this attempt to act tough has sent thousands of the best-qualified, hardworking migrants to our competitor nations. It feels anti-business to me; I'm sure in four or five years' time you'll read about a Cambridge or Oxford graduate who was pushed out by it, went instead to Silicon Valley, and started the next online giant worth billions.

The truth is, in a global economy, wealth depends less on the goods you can package up and ship, and more on the services you can sell. And Britain is a leader in providing services to foreigners, not just banking and finance, but also education, tourism, health care and media, as well as high-spec manufacturing and luxury goods - all of which growing nations - like the Chinese and Indians - want.

All these industries will attract foreign workers - usually the best-skilled - to fill the extra jobs. Young academics, doctors, designers and other graduates coming to Britain from the depressed parts of southern Europe in search of work, pushing up productivity and providing the tax revenues the Government will need to deal with the UK's growing numbers of elderly people. Far from undermining the welfare state, these migrants will make it sustainable, helping us to dodge the oncoming demographic crash that threatens the UK's ability to pay for pensions and the NHS.

Twenty-two of Britain's 114 Nobel laureates were born abroad; Tesco, Marks & Spencer, EasyJet and many other successful companies were founded by immigrants and their children; and new arrivals of all cultural backgrounds are twice as likely to start a business as people born in Britain.

I'm an immigrant of sorts (coming from a mixed background, I moved to London when I was 12 years old and subsequently got my British passport), and the online invoice finance business I helped to co-found (MarketInvoice) employs 14 people, and has already provided £20 million of funding to over 100 British businesses.

We already employ Irish, Polish, Russian, Bulgarian, Australian, Malaysian staff members alongside British nationals, and every week receive applications from world class graduates looking for jobs in the start-up world clustered around "Silicon Roundabout" (aka Old Street Roundabout). But visa constraints sometimes make the extra burden for foreign nationals too onerous for such a small company as ours.

The British public appears overwhelmingly hostile to Immigration - it regularly comes top when pollsters ask what is wrong with Britain - some will feel that yet more immigrants, however wealthy or successful or entrepreneurial they are, are not the solution.

British politicians should be willing to stand up & be counted, and say the unsayable - immigrants are a vital part of keeping Britain strong.]]>