Despite their protestations to the contrary, it seems that banks are still limiting their lending to SMEs in the UK. A new study from commercial finance experts Amicus has shown that 1 in 6 small businesses say they have been turned down for loans by banks, an increase on the previous year, from 11% to 16%.
In terms of the effects of that closing off of bank finance, almost a third (31%) of SME owners say the failure to secure finance terms with a mainstream lender meant they had lost out on a business deal or investment opportunity.
The knock on effect of that, Amicus says, has been greater interest in alternative finance – including forms such as property finance, crowdsourcing, invoice finance and asset finance.
‘Banks too slow to make decisions’
A closer look at the survey shows that speed of decision making is a serious problem for mainstream lenders, with over twice as many small firms saying that mainstream lenders are unable to reach quick enough decisions (15%, up from 6% in 2015).
More than one in ten (12%) SME owners highlighted the inflexible lending conditions and 8% the insufficient knowledge and experience as reasons for mainstream lender underperformance.
But what else is driving SMEs to investigate the possibilities of alternative finance? Over half of SME owners (51%) believe that the greater flexibility offered by alternative finance providers makes them more attractive than traditional lenders, up from 45% in 2015.
Greater ability to lend (46%) was second and longer payment terms (34%) was third. Speed (30%), specialist knowledge of their clients’ industries and challenges (29%) and more compelling payment structures (27%) was ranked fourth, fifth and sixth respectively.