Alternative Finance Challenges Mainstream Lending For Slice Of Sme Market
According to a new study1 by Amicus, a leading specialist lender, one in six (16%) small and medium sized enterprise (SME) owners seeking finance say they have been turned down by a mainstream lender (i.e. a high street bank), up from 11% in 20152.
Nearly a third (31%) of SME owners reported that their inability to secure finance terms with a mainstream lender meant they had lost out on a business deal or investment opportunity. As a result, this has led to greater interest in alternative finance – including forms such as property finance, crowdsourcing, invoice finance and asset finance.
The findings highlight how over twice as many small firms believe 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.
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.
SME owners predict that demand for alternative finance will increase by an average of 28% over the next two years, up from 26% in 2015 - with over half (51%) having reported to have already used alternative finance or considered using it.
- 16% of SME owners seeking finance say that have been turned down by a mainstream lender, up from 11% in 2015
- 31% reported that they had lost out on a business deal or investment opportunity
- Twice as many small firms believe that mainstream lenders are less effective at reaching quick decisions compared to last year
- 51% believe that greater flexibility makes/would make alternative finance more attractive than traditional lenders
- Demand for alternative finance will increase by an average of 28% over the next two years, up from 26% in 2015
1 Research conducted online and by telephone by onepoll among 400 SME business owners between 9th - 14th March 2016
2 Research conducted by Consumer Intelligence among a representative sample of 422 small business owners in April 2015
It's clear from this research that the demand for alternative sources of finance is continuing to grow in popularity. Mainstream lenders are falling short in terms of the agility and speed that is required by SMEs seeking finance.
Having built a strong business base from our property lending expertise, we have responded to the rapidly growing demand for alternative sources of finance, and are broadening our proposition into other areas of lending. Our relationship-based approach resonates well in specialist lending markets that are poorly served by mainstream lenders.John Jenkins
CEO of Amicus