LFP083 – Matchmaking Lending and Borrowing with Conrad Ford CEO Funding Options

Conrad was on the show back in LFP020 since when he has built Funding Options (strapline “your free marketplace for business finance”) into one of the most successful London Fintechs. They were chosen as one of three UK government mandated SME Referral Portals, are the largest of those by an order of magnitude, increased revenue fourfold last year, are on target to triple again this year as well as being on target to be the UK’s largest introducer of working capital finance.

Funding Options essential task/service is lining up all the many SME borrowers out there with relevant sources of Finance. A task made all the harder by the plethora of lenders and the many types of lending finance available.

How has this task evolved over the past 2.5yrs?

How is lending right now?

How is borrowing?

Topics discussed on the show include: 

  • standing desks
  • curious US animal metaphors around business
  • productivity patterns
  • pivoting vs going round in circles in a Fintech startup
  • an interesting case study in transitioning from being a startup to a scaleup, what happens and why it works – vicious circles to virtuous circles
  • the pros and cons of a corporate strategy background
  • creating a tactical execution company and strategic/firefighting on top
  • Professor Jordan Peterson’s lectures on Personality and its transformations; Carl Jung and The Lion King
  • archetypes, why dragons hoard gold and virgins; what the non-allegorical meaning of the battle against the dragon
  • in the UK £15bn (of £75bn) of SME finance is introduced by brokers
  • Funding Options leading role in introducing working capital finance
  • asset finance in context
  • Fintech has been over-hyped and the majority are a long way from profitability
  • Funding Options could be as little as three months away from profitability – they are becoming a real business (not “just a Fintech”)
  • there remains no lack of supply of capital
  • traditional high street banks are back in the market and in a sensible way
  • how the global financial crisis hit traditional businesses in the UK – a lot of them have kept the door open to new providers
  • new providers may be a bit more expensive but will be faster, more reliable, more flexible
  • P2P is important but massively over-emphasised; cf challenger banks – Oaknorth eg has done £600m of lending in their first two years
  • a discussion of P2P – has it succeeded or has it failed?
  • serving smaller SMEs is uneconomic for banks, relationship banking is only profitable for businesses with more than £1m turnover
  • the lack of an “interbank” market in P2P and how this holds them back (along with the inability to create money); hence banks competitive advantage on price (even if they end up being very bureaucratic)
  • there is also a return to normality in the borrower market
  • the challenge is from the increasing percentage of the UK economy which is service/information sector – thus having no assets to use as security for lending
  • Fintechs comparative advantage in non-asset-based lending technology
  • regulatory arbitrage and constraints
  • SME overdrafts were falling at a rate of £5m a day for several years – an amazing statistic [due to Basel 3 rules]
  • the SME Fintech lenders that look like they will be sustainable are those that in essence were stepping into this short-term funding gap
  • transactional credit demand
  • Funding Options active panel of lenders remains around 50 – the key factors that lead to this number in terms of competitive tension
  • they are regulated as a credit broker
  • online challenges to traditional credit brokers – “about £1bn per annum of this will disappear over the next ten years”
  • the UK SME Bank Referral Scheme launched at the end of last year – 9 banks, 3 portals – Funding Options did the first deal under this scheme and has now financed millions of pounds under this scheme
  • analogies with the bank appeals scheme (brought in about 5yrs ago) – modest steady start but totaling about £100m of lending which otherwise wouldn’t have happened
  • the UK is ahead of Europe re open banking and sme referral schemes
  • Funding Options aim to launch in Europe next year
  • the misunderstanding of the impact of Brexit on Fintech – the misunderstanding that much isn’t “passportable” even at present
  • how the Rocky films relate to being in Fintech

And much much more 🙂

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