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COVID-19: How fintech lenders can lead the charge

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Nucleus Commercial Finance

The unprecedented uncertainty caused by coronavirus is having a profound impact on SMEs around the globe. Businesses across the country are concerned about the long-term financial impact of this pandemic, with many forced to contemplate their mere survival in the months ahead. 

Our own research undertaken just prior to coronavirus hitting demonstrated that over 2.6 million UK SMEs predicted they would be out of business within a month if they were suddenly unable to trade. At that moment, nobody knew that was a reality many SMEs would be facing within a matter of weeks.

This fortnight has brought with it high levels of economic uncertainty, with the situation having been likened to that of the global financial crash in 2008… and yet for businesses around the world, the struggle ahead is set to be worse, as COVID-19 is causing a collapse in consumer spending different from anything we’ve ever seen before. 

Finding opportunity in adversity

The good news, however, is that opportunities are born out of crises and when looking back, it’s clear there are lessons to be learnt from previous events that badly hit world economies. The banking crisis that occurred just over a decade ago instilled a general sense of anger towards the existing financial system and a huge lack of trust in the banking industry altogether. 

The 2008 recession was the turning point for a rise in British entrepreneurialism. SMEs up and down the country had no choice but to improve, adapt and overcome as their survival in the future depended on it – and as a result, we saw the rise of the alternative lending sector as they were willing to support SMEs when the banks simply wouldn’t. 

Figures from UK Finance show that bank loans fell from £44.5bn in 2008 to reach a low of £38bn in 2012. Whilst traditional financial institutions were set on tightening their lending criteria to protect themselves from further losses, alternative lenders stepped up to the challenge and proved to be the backbone of UK SMEs. With the ability to provide faster decisions and more flexibility, alongside a willingness to help wherever possible, alternative lenders positioned themselves as a primary solution to funding challenges. 

The concept of Nucleus Commercial Finance was to fill the gap created by banks retrenching to ensure UK SMEs are supported and able to flourish. My own experience of how difficult it was dealing with banks and getting timely support meant that I was well placed to help other businesses facing the same obstacles. Since Nucleus first began 8 years ago, we have seen a rise in SMEs exploring alternatives to banks as they learn more about what other options are out there for their business. 

Technology leads the way

As the coronavirus pandemic continues to intensify, and businesses previously deemed healthy struggle to survive, the need for the adoption of new technology has never been more apparent. Technology has already changed how we communicate with our colleagues, suppliers, and customers, but now it’s changing how we access information and how our businesses operate on a day-to-day basis. 

Thanks to the technological advancements made over the past decade, many businesses can transition seamlessly to remote working amid the COVID-19 lockdown. But above all, businesses, especially lenders, need to continue providing the same vital services and products as before - and this is where real fintechs are leading the charge. 

Over the last few weeks, we have seen that numerous fintechs have been forced to furlough their workforce as they did not have adequate tech support in place to effectively manage the change in circumstances. At Nucleus, we constantly invest in our technology and this has enabled us to continue to operate at full capacity.

Business owners struggling with cash flow problems need to be able to access information and finance at the click of a button. It is through events such as this, that we can shift the narrative from lenders talking about funding small deals in a few hours to funding large deals in a matter of minutes, something we are already doing. 

Speed is of the essence during times like this, therefore thanks to our investment in AI and automated underwriting, we can provide decisions and funding within hours which is something the banks and many alternative lenders simply cannot do due to falling behind where tech is concerned. 

Shining light on positivity during trying times

The current economic climate is a disconcerting time for everyone – customers and businesses included, but I want to remind you all that there is still plenty of support available to help you navigate this turbulent time. Coronavirus has helped identify who the real fintech players are and looking ahead, we will start to see which lenders can truly provide financial support to SMEs when they need it most.

With the help of leading fintechs, I believe we will once again see the strength and determination of SMEs to rise from the ashes to make a meaningful difference to the lives of British consumers, as well as their essential contribution to the economy. We are here for your business, ready to help and what’s evident is that from the dust, opportunities will always arise.

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