The digital economy has created myriad new types of business with different needs to traditional, bricks and mortar firms. And with new business comes new challenges, one of which is access to the right sort of finance. Andy Davies, sales director at LDF, explains how the company is evolving finance to suit this new economy.
What changes have you seen in the types of businesses approaching you?
We’re certainly seeing an increase in the number of new, digital businesses in emerging industries that are looking for finance, whereas previously, it was more traditional businesses: manufacturers, for example – real bricks and mortar, asset-based businesses.
What we’re seeing now is a product of the new economy – far more innovative businesses: those that are tech based, and IT firms.
How do the needs of these businesses differ to traditional asset financing?
If you look at where we fitted in asset financing in the past, there would be a specific, tangible purpose that the funding would be attributed against. Whether a piece of equipment or a vehicle, it would be something with a palpable use or purpose. Now, to accommodate the digital age, we’re looking at loan options where it’s a longer-term, non-tangible type of spending. More “soft costs” are now required: marketing, digital marketing, website development – the types of things which we would not have traditionally looked at in the past.
In terms of products, how have you reacted to the changing market?
Traditional loan products have a specific purpose attached to them – that’s how LDF has operated in the past, and it’s been a fairly standard approach across the industry. If you wanted a loan, you would have to prove exactly what the tangible cost was going to be – whether it was £10,000 for refurbishment or £50,000 for a machine – we would need to see the invoice matching that figure. To try and counter that, we’re looking at new, alternative products. One of these is a business development loan which allows us to look at a number of intangible products such as marketing, recruitment or development and, provided the customer has a story behind what this will mean for them – how they will benefit from that cash injection – then we can provide a loan on that basis. It’s a case of providing a loan without a tangible purpose attached to it.
How can your technology make the process of financing easier?
We have spent, and will continue to spend, an awful lot of money on trying to make the customer journey as simple and straightforward as possible. How we can make the whole credit process as slick as possible is a big part of our evolving business model.
People are now looking at alternative finance far more than ever before. I think many look outside the mainstream banking options, especially those who are a bit more tech savvy. Whereas previously, once they’d been declined by their bank, that could well have been the end of their journey – but we are providing an alternative.
How do you stay at the forefront of financing in an evolving business environment?
We’ve invested heavily in a delivery platform called Lendinghive, which allows us to look at asset finance via an easy-to-use digital application and offer loans within 30 minutes. As part of future-proofing our own, and our customers’ businesses for the growing digital economy, we’ve invested a lot of money in trying to ensure that we cater for how the next generation will look for finance.
It’s a new direction in business finance designed specifically for small to medium-sized companies, which puts the recipient in control of a bespoke finance plan. We very much believe that we’re at the forefront of how this kind of technology will work.