Chirag Shah co-founded Nucleus Commercial Finance in 2011 with the intention of being a ‘true alternative to the banks’. Nucleus offers funding from £5,000 to £50 million across a suite of products, supporting businesses that turn over anything from £100,000 all the way to £400 million. Here, we talk to Shah about balancing innovation and day-to-day operations, keeping staff motivated, and the state of the alternative finance marketplace today.

What differentiates you from other financiers?

There are over 1,000 lenders in the UK right now, but the leading banks may each only offer a single product. Lenders often have to shoehorn the needs of businesses into the product they are offering; they’re not flexible enough. We have got seven different products, from invoice discounting to property finance, and we try to structure our products to the requirements of each business. It’s not only about solving the problem today, it’s about solving the medium and long-term problems so the business can succeed. As a business grows and needs different funding, they get involved with us, rather than having to go out there and look for new finance.

Our biggest [asset] we always say is our team. We have very experienced team, a good mix of very senior people in the risk department, and tech people. That mix helps us to analyse the business in a different way to a lot of other funders out there. I believe we offer a deeper level of analysis of a business before any funding decision is made.

What do you make of the alternative funding landscape at the moment?

There are a lot of providers out there. Is there really room for 1,000 players in the market? I don’t think so. It’s all about who can achieve scale. Is consolidation the way forward? I’m not sure – a lot of providers are offering the same thing and wouldn’t gain much from mergers. Whoever cannot achieve scale in a short period of time is going to struggle to be relevant in the market.

What are the biggest challenges scale-ups face today?

I can speak from experience on this. We have grown from eight people to over 120 people in two years. The biggest problem is people; we struggle to find the right staff. And as you grow more, it becomes more and more difficult to find the right people. As a business, it’s no use trying to just hire people for the sake of it. So we invest in training. We spend a significant amount of time in training our junior team to rise to the level of our senior team.

“You can innovate, even if you’re not well funded. It just needs to go hand-in-hand with being efficient operationally”

We want to make sure that everyone is coming to work because they want to. Since we started, we have lost five people to competitors, in an industry notorious for churn.

Taking care of your finances properly is a major challenge. Businesses can have a big idea but often forget to think about how to fund it. That [funding decision] should be integrated into everything that you’re doing. It’s no use coming up with the best ideas in the world and then not having the funds to do it or, even worse, starting a project and then realising half way that you don’t have the finance for it.

How much of a business should be dedicated solely to innovation?

It’s dependent on much money you have. You can spend as much time on innovation as you want if you have got a runway that will see you funded for the next five years or so. If you don’t have that kind of a runway, you’ve got to focus on revenue as well. So it really depends how well funded you are. You can innovate, even if you’re not well funded. It just needs to go hand-in-hand with being operationally very efficient, especially for scale-ups.

Overall, you have to get the mix right when it comes to running your business, you can’t just focus on one area. You can be the best widget maker in the world and you can design the best widgets in the world. But if you can’t find a market for those widgets, there’s nowhere to go.

What keeps staff motivated at Nucleus?

Everyone’s opinion matters, and everyone in the company knows that. Anything that is said [on the floor], someone will listen to it. That motivates people.

When we started, the first thing we wanted to create was a culture that motivates people. I used to work at a bank, and the culture was based on having done the same things for 20 years; It doesn’t mean it’s right. If someone wanted to suggest a new way of working, noone wanted to listen. So when we started, we said we want people to [contribute]. It’s no use hiring good people and then not listening to them.