Have SMEs outgrown banks? How alternatives are meeting SME needs

According to the British Business Bank, bank lending volumes stayed relatively flat in 2017, while other forms of debt finance, grew significantly. The message from lenders like Thincats is cutting through, with a majority of SME owners now aware of alternatives to traditional bank finance.

As with any market, there are numerous options for business owners to consider, from cash flow loans to invoice finance.

“It’s very important to shop around,” Sherrington explained. “Long gone are the days when you only had the option of four or five banks to approach for external funding.

“The positive news for businesses and borrowers in today’s low-interest rate environment is that the vast majority of large financial institutions are looking to deploy capital and make a reasonable return. Funders generally want to lend.”

Just 15% of small UK business owners trust traditional bank lenders, according to one survey. Negative perceptions have primarily been driven by personal experiences, bank reputation and a general fear of accessing external finance.

“Unfortunately, the fat cat generation of bankers that we’ve all seen in the tabloids have eroded a lot of confidence in that very traditional route of funding and the banking system,” Sherrington noted.

Despite the relationship between banks and SMEs souring, Sherrington explained why access to external cash remains vital for entrepreneurs.

“If a business wants to enter a new market, develop new products, expand, grow and create more job opportunities in the UK, then external funding will allow them to do this – and maybe quicker than they would be able to otherwise.

“We’ve seen a significant rise in the availability of credit, through the form of business loans and also in the rise of alternative funders like Thincats – which know how to find and access that capital – allowing businesses to grow and enhance profits for shareholders.”

According to Sherrington, a fresh, forward-thinking approach has enabled alternative lenders to fill the trust gap left by traditional banks. In today’s environment of “instant gratification”, business owners are demanding a service that works for them.

“Take the classic example of Amazon – you order an item and expect it to be delivered the next day. Going to a traditional lender can sometimes take an awfully long time to secure funding, and that’s a distraction for a business in terms of resource and management time. It holds them back,” he said.

“Alternate funding allows decisions to be made very quickly and therefore allows a business to secure funding and deliver their plans for growth.

“Normally an alternative funder is smaller, you have access to decision makers and it’s a much quicker process. It’s a lot more beneficial to a business because it allows them access to capital in a less intrusive way to a traditional lender.”

Share this story