Mainstream lenders under pressure from alternative finance » SMEInsider

Mainstream lenders under pressure from alternative finance

lots of money

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.