If you’re a business that offers SME funding, you’re constantly thinking about ways to tap into different audiences and find new clients. It can be a real challenge, and one that can prove the difference between sustained success or a dangerous decline.
Data from the British Business Bank reveals that 45% of SMEs applied for external finance in 2020 – a significant rise compared to the 13% in 2019, and a surge that was no doubt heavily influenced by the coronavirus pandemic.
The figures show there are plenty of companies out there seeking help but when it comes to financial products in particular, SMEs want a partner they can trust. It can be difficult to know how to position yourself as one of those when your competitors all seem to offer the same messaging and promises. What can really tip the scales is an endorsement of your business from another party.
This might come in the form of a referral or an introduction. But what’s the difference and which is the best way to secure new clients?
What is a referral?
A referral is where your business is recommended by a third party – perhaps one who has used your products or services in the past – to an SME owner who might be seeking funding. In many cases, these referrals are solicited in that your business may actively ask its partners to endorse your services to other parties who may be interested. Often, there are financial rewards at stake for the middle man in the form of a commission if the referral leads to a successful conversion.
What is an introduction?
Introductions are similar to referrals in that they involve a third party bringing your business and a prospective client together. Again, the introducing party can stand to benefit financially from the arrangement but there is a key difference in that introducers typically make their recommendations as part of a natural conversation, rather than seeking out prospective clients on your behalf.
For example, a financial advisor to an SME owner may introduce you if the owner were seeking some external funding to support their business’ growth. This introduction would occur naturally, as a part of the advisor’s service to help their client.
So, which is the best way to secure new clients?
Many believe that introductions are preferable to referrals because the partners in the middle do not feel pressured by your business to actively seek out prospective customers. Instead, they can treat their clients as they normally would and only make an introduction if they believe it would be in the best interests of that client. From the SMEs’ point of view, they’re more likely to act on a recommendation that’s been presented to them in a natural manner, rather than one they feel has been pushed upon them.
