All you need to know about alternative finance

Industry News24th January 20190 CommentsJack Christian

Approximately 60% of SMEs are uncertain about their potential to finance lasting growth. Banks are becoming more reluctant to provide loans to them, increasing the need to access crucial funds through alternative finance providers for their lending requirements.

Jack Christian

Alternative Finance has empowered SMEs by giving them access to an array of flexible and affordable financial solutions. And with these alternative financiers now providing more funding to SME’s than ever before, all types of businesses are now receiving funding to further their business goals.


The only main downfall I foresee for business owners is not having the support, knowledge or education on the range of products to figure out and implement the best solutions to fit their requirement and needs.


Here are six, need to know, facts, about Alternative Finance:


1)    Only half of SME owners are aware of Alternative Finance options

Around 50% of SME owners are unsure on what alternative funding options they actually need. Some SME’s are even using alternative options rather than the bank due to timescales, jumping through hoops and not being 100% that there will be an outcome.


2)     Most SME businesses go bust due to cash flow needs

Cash flow problems generally occur in business due to systemic late payments made by customers/clients, or a lack of quick access to finances. Additionally, 55% of SMEs find cash flow to be the biggest hurdle in their path to success.

Often this is a catch 22 situation for businesses that can grow but need cash flow to service new projects, work or stock.


3)    Unsecured alternative Business Loans in the market

Alternative business loans are available for businesses who have been trading from 6 months plus though the underwriting criteria will vary for different lenders. SME’s can get funding over a 12-month term to 60 months, lending from £5,000 – £500,000 with a PG (Personal Guarantee) from 51% of the owners.


4)    Timescales for Alternative Funding

Some alternative funders can fund a business on the same day they receive an application and underwrite a deal. The alternative industry average would be 3/4 days across providers.

(An incentive for SME owners to source materials, fix cashflow issues quickly and secure stock in real time)


5)    Startup SME’s / Secured Loans

Often new ventures will struggle with the barrier of needing finance to start and assist with their new business. As there is no historic trade or history to back an application for an unsecured loan, there can be help through a secured loan for Limited companies with owners who are UK homeowners and have some equity to use as security.


6)    Alternative Finance growth

Europe’s alternative finance market has exploded over the last five years, now worth an estimated €7.7bn according to the Cambridge Centre for Alternative Finance. The UK alone has grown by over 43% in the last year to £4.6bn, with receivables and invoice finance accounting for around 10-20% of this.

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