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Challenger banks are best placed to meet the bespoke needs of UK mid-market firms

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BLME has suggested that 70 per cent of Britain’s mid-market firms applied for bank finance in the last four years – one in five from a challenger bank – and 93 per cent were successful. 

This availability of finance, according to Jervis Rhodes, head of corporate banking at BLME, has added £148bn in output and 152,900 jobs to the UK economy. 

He said: “Historically the UK’s big high street banks have had a strong grip on the business lending sector. However, there is now evidence that the tide is turning as we see mid-market bosses look for a bank with a competitive offering that has the time and expertise to understand their specific business. This will drive greater innovation and create a healthy, vibrant landscape for business lending across the UK.”

The report found that 46 per cent of leaders sought alternative forms of finance with the belief that their business would be better understood. Some 38 per cent said they thought alternative finance sources would be more willing to lend, and 35 per cent said they thought it would be cheaper to obtain finance from alternatives.

Challenger banks, Rhodes claimed, are best placed to meet the bespoke needs of the UK mid-market. While the stranglehold of big high street banks is well documented, the fact that one in every five mid-market firms has sought finance from a challenger bank is cause for real optimism, he said. As well as established challengers there are more new names entering the fray – recent figures revealed 29 live applications for UK banking licences. 

Read also: The five challenger banks focusing on IT to stand out in the retail crowd

It was revealed that a significant proportion of mid-market bosses have either already chosen banks outside the big four for their financing needs, or would consider doing so.

Some 23 per cent said they used a challenger bank before and would do so again, while another 47 per cent said they had not yet but would consider it. This represents 70 per cent of the UK mid-market who would use a challenger bank. 

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Rhodes said: “For all those challengers vying to compete with well-established banking institutions, the findings we have uncovered here are mightily encouraging. Clearly, there is an appetite for real competition – driven by a desire for lenders that are flexible enough to meet the specific needs of the mid-market. 

“But what’s also encouraging is that those businesses not yet thinking about challenger banks are there to be convinced. Central to it will be education, increasing awareness and addressing misconceptions.”

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