More SMEs turning to alternative finance

The British Business Bank 2018 Small Business Finance Markets* report shows that UK small businesses are increasingly sceptical about bank borrowing and are diversifying in their choice of finance.

Continuing a trend identified in last year’s research, 70 per cent of SMEs are willing to forgo growth rather than borrow.

Over the last ten quarters, only 1.7 per cent of smaller businesses sought new loans, a record low since data was first collected in 2011.

Responding to these findings, Mike Cherry, Chairman of the Federation of Small Businesses, says: “The fact that less than 2 per cent of UK small firms sought new loans over the last couple of years is a real concern. We’re lagging behind the US when it comes to venture capital investment in businesses to the tune of millions. That has to change.”

However, Keith Morgan, British Business Bank CEO, says the UK has a “thriving start-up and growth culture” and, with better access to finance, small firms will to be able to increase their level of growth.

“There is evidence that small businesses are exercising more choice,” Mr Morgan says. “They are shopping around more and they are shopping around more outside the big four. They are using the internet more to shop around.”

In 2017, the value of SME asset finance deals and peer-to-peer business lending both showed strong growth, an increase of 12 per cent and 51 per cent respectively. Significant increases were also seen in both the value and number of SME equity deals (up 79 per cent and 12 per cent).

Mr Cherry does however feel that many small firms aren’t necessarily aware of all of their options, adding that “small firms will often start their finance journey by speaking to the bank they’ve always dealt with, leading them down a more traditional debt route that won’t suit everyone.”

With demand for alternative finance likely to increase as we move further into 2018, what is essential is that SME’s choose a specialist adviser who can recommend the right financial products for their specific business needs.

Our partner business, BM Structured Finance, specialises in sourcing and restructuring debt finance for SME businesses. We match the most suitable products to each individual circumstance and work together to ensure compatibility and satisfaction, thereby enhancing the business’ cash flow liquidity and facilitating maximum growth.

Whether you’re a start up or a well-established business, cash is king and managing its flow is crucial to your long-term success. For more information about how BM Structured Finance can help you and your business, contact Simon Belton or your usual Beavis Morgan Partner.

* Download the 2018 Small Business Finance Markets report