Risk: The Importance of Relationships

by Adrian Davis / June 2, 2023

Welcome to Thriver’s short reads about investing in SME debt and how the SME debt market works. You’ll read them faster than you finish your cup of coffee.

Borrowing by SMEs represents $400 billion in debt that is growing at 6% a year. There are 170,000 SMEs who have at least $2 million in revenue and need money to grow further. Using investment syndicates, Thriver provides those SMEs with innovative, well-thought-out solutions with quick turnaround for funding needs of $250,000 to $1 million.

In recent notes, we’ve discussed return OF capital and return ON capital for investors. An important element of both is risk mitigation. A valuable risk mitigation tool is establishing and building relationships.

Traditional business banking – long since gone – was built on relationships. Ongoing relationships between the SME and the lender that developed over time. Open and direct conversations about the opportunities and challenges for the business and how the lender could assist whilst still protecting their investment.

A relationship-based approach is critical to generating returns and mitigating risks for our investors. We start building relationships immediately. Our first step with a client is assessing their finances, their business and their risks. We identify opportunities and threats. We set this all out for our client. We provide a baseline for SME owners to understand the needs of their businesses to grow. It gives them certainty. It also enables us to build an actionable funding plan for them, which is the next phase of the relationship.

That funding plan sets out ideal funding structures and what the clients should do with the funding to grow their business. A big element is communication, particularly of any ‘bad’ news. Communication is easier with a strong relationship. If we know the news – good or bad – we can help shape solutions. Our ability to keep an open channel gives our clients confidence.

Once funding is in place, our relationship continues. It’s a structured and ongoing process. We sit down with our clients and assess performance and identify new and changing risks. We regularly meet with our clients to assess performance, identify new and changing risks, and explore opportunities for additional funding as their businesses expand. Where possible, we strive to reduce overall costs.

Our clients find reassurance in knowing that they have a partner in the trenches, committed to supporting them through the challenges and triumphs of growth. This partnership provides comfort, and our proximity to their business positions us well to identify threats and help overcome them, safeguarding our investors’ capital.

Our next newsletter looks at other risk mitigants. Look forward to being in your inbox then.

by Adrian Davis / June 2, 2023