SMEs continue to favour alternative methods of financing in the wake of the 2007-2009 economic downturn, which has left the banks either unwilling or unable to provide funding for small businesses to the same extent as before the crisis.
A new study by Amicus Finance Plc reveals the key factors that are driving SMEs towards alternative lending options, as mainstream banks continue to feel the pressure imposed by this rapidly growing industry.
The research shows that 32% (i.e. roughly 720,000) of small business owners have lost out on an investment opportunity due to their bank being unwilling to service their borrowing requirements – and into this space steps alternative lenders.
According to the report, 37% of small business owners say that alternative lenders have a greater ability to lend, whilst 45% believe that alternative finance options offer more flexibility than mainstream banks.
25% of SMEs are cited as saying that alternative lenders offer a greater customer service, 24% say that they have greater specialist sector knowledge, and 22% acknowledge that the sector offers a faster speed of service.
Dissatisfaction with mainstream banks continues to be prevalent amongst small business owners, with 60% of SMEs predicting that demand for alternative finance will increase by an average of 26% over the next 24 months.
Crowdsourcing, invoice financing, commercial mortgages and asset finance have proven to be the most popular forms of alternative finance for SMEs in recent times, with 42% (i.e. approximately 950,000) of small businesses having considered these options over the past 5 years.
CEO of Amicus John Jenkins commented:
“When it comes to servicing the needs of small businesses, alternative lenders are outscoring the banks in many crucial areas such as flexibility, quality of customer service and speed. Many small firms tell us that speed of execution can make all the difference when there’s an opportunity on the table that needs a quick turnaround. Given the challenges faced by banks in recent years, it’s little surprise that many small business owners feel they have missed out on exciting deals and growth opportunities due to a lack of support.
“Most business owners who have turned to alternative lenders discover that dealing with them is a breath of fresh air – and that’s why they are continuing to gain popularity.”