The public’s trust in the banking institutes have degraded due to various financial scandals led by the high street British Banks. Additionally, the banks have also been closing their doors to start-up businesses that are seeking funds.
However, only because the high street banks are unavailable to provide small businesses and start-ups with funds, it certainly does not mean that young and struggling entrepreneurs should not seek funding. As a matter of fact, there are various funding options made available to small businesses and start-ups.
These new services have given rise to a new industry across the country known as the alternative finance industry. The alternative finance industry has emerged to fill in the gap left by the British Banks.
The UK SMEs need to try several different sources of funding to see which one works for them and provides them with a stable cash flow. There are several UK SMEs that have been making use of the funding services provided by these alternative finance firms.
The London SMEs are well aware of these alternate options compared to the businesses in other part of the UK. Now over 1000 businesses are leading towards alternative financing as a funding option they can use to secure funds in the time of need.
When it comes to export and business finances, half of the SMEs in London do not export any goods or services outside the UK. The same is applicable to just 30 per cent of the businesses from the UK as whole.
We understand that working capital is of utmost importance when it comes to SMEs wanting to export. However, only 42 per cent of SMEs in London have a good understanding of the finance that might be available other than the British Banks.
On the other hand, more than 50 per cent of SMEs in London agree that enough guidance is available to businesses looking for options. Similarly, 36 per cent of SMEs across the UK agree to the same as a whole.
A lot of SMEs in the UK believe that the banks have made it difficult for them to access flexible and tailored finance services that are available. While these businesses never looked beyond their local banks for funding, it is obvious that there is more for finance providers to do to boost businesses’ understanding of finance options that are available to them.
With the Brexit effects yet to be known, we believe that exports will be vital for businesses looking for growth in the coming years. According to the Secretary for State of International Trade, the UK is less likely to meet its ambitious export target despite having amazing global growth in recent years.
However, the UK SMEs can help the UK achieve this set target. We are observing the SMEs in London and beyond need guidance on how they can start exporting. The alternative finance industry wants the UK SMEs to feel comfortable while looking for funds beyond their local banks. The confidence of the UK SMEs in the alternate finance industry has given rise to the alternative finance market in the UK.
In the light of this, we are here to help small business and start-up owners understand the benefits for this rising industry.
Here are three major benefits of using alternative finance over local bank funding services.
1: Less Stringent Qualifications
Like we have mentioned before, it is much easier to get an alternative loan. But you still have to prove that you are eligible enough to repay the amount. However, the process is much more fair and balanced than the traditional one.
Since alternative finance lenders use non-traditional forms of determining credit worth, they get a comprehensive financial footprint of the borrower that goes beyond the credit history. This thus makes alternative financing a more fair and balanced approach in terms of making loan decisions.
2: Abundance of Options
Traditional banks give out business loans of definite amounts only. They do not consider anything less than that to be worthy of their time and money. This certainly means that small business owners needing small amounts of cash are neglected.
As we all know, most of the immediate business financial requirements call for short-term cash infusions. Here’s where alternative finance funding options come handy.
There are several funding options that alternative finance firms offer their clients. Some of these options include cash flow finance, invoice finance, property finance, asset finance etc.
You can get in touch of any alternative finance lender to understand which option is most suitable for your situation. Once you are aware about your situation, you can decide whether you wish to opt for the funding options or not (according to your convenience).
3: Lower Interest Rates
We all are aware about the little to no flexible terms of interest rates that traditional banking institutes offer. On the other hand, the alternative finance market is much more competitive, which ultimately lowers the interest rates they offer to their borrowers.
Since alternative lenders usually have access to a more comprehensive profile of borrowers, they tend to offer lower interest rates to their clients seeking funds from them compared to the traditional banking institutes.
Having comprehensive information about the applicants helps the alternative finance lenders manage risk, as they can more accurately determine whether the borrowers will repay the loan or not.