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3 Reasons Why Banks Are Losing Out to Alternative Business Finance Providers

Estimated Read Time: 4 Minutes

JESSICA LAMBERT , 27 January, 2023

In the UK alone, it is estimated that more than 500,000 new SME’s are created every single year. But with every new business on the horizon, there is a requirement for financial support if the need arises.

Small businesses are a huge source of job creation and growth for the UK economy, so it only seems logical that there are alternative business finance providers out there who are willing and able to help support them, too.

A report by UK government owned British Business Bank Investments (BBBI) found that credit conditions for small businesses are improving, with a notable increase in asset finance and peer to peer (P2P)  business lending.

It certainly comes as no surprise that P2P lending is on the rise. Alternative business finance providers have recognised for a long time that there is no longer a ‘typical’ business model, which means there should not be a one-size-fits-all approach to finance, either. But how does this relate to banks?

Post-crisis in 2008, banks lost their appetite to lend to businesses, those they did lend to, they liked to deal in black and white, with far less flexibility than an alternative provider. Add to that the time it takes for an application to be assessed and you could be waiting up to three months, just to hear a ‘no’.

The alternative finance sector in the UK is estimated to be worth £12.3 billion by 2020, and now that it is a fast-growing and hugely viable option for small businesses seeking financial help, it does cause one to question what exactly they are getting right – and what the banks are not…

Alternative Finance Providers Realise That Funding Is Not Always Black and White

When compared with banks, alternative business finance providers are by no means anywhere near as rigid in their approach. They often provide loans that are tailored to the requirements of the individual borrower and will assess your case on its merits using a range of different digital tools, as well as their expertise.

As the marketplace for business finance has grown, along with the range of funding solutions now on offer, there is a much higher probability of finding a finance product that meets your needs.

If you do your research and find a reputable finance provider, they will spend time getting to know your business, then will aim to gain confidence lending to you by understanding the needs of you and your business better.

Banks Faff – Alternative Finance Providers Do Not!

The reality is that traditional bank finance takes far too long for it to be the most viable option for many businesses. The process can take weeks, if not months and this timeline could be detrimental to a cash-strapped business or mean that they miss vital opportunities.

Whilst, ideally, businesses would look for finance proactively, well in advance, for many small businesses this is simply not an option and very hard to predict, meaning that they require almost immediate access to funding when unexpected hurdles occur. Some alternative business finance providers, such as Nucleus Commercial Finance, give a same day ‘yes’ or ‘no’ answer and are able to pay-out loans within 24 hours, meaning that business owners get a hassle-free experience and can execute their plans when they need to.

Having fast access really will make all the difference for many businesses and sometimes it will mean the difference between surviving and eventually thriving, and a business shutting its doors for the last time.

However, where possible planning is paramoung to successs. It is always best to stay ahead when it comes to accessing finance. For many, it is a scary concept but it really does not have to be. The problem arises when businesses start reactively looking for finance, rather than searching proactively, in good time.

Seeking financial assistance should not come with stigma attached. It is smart to use finance to advance your business or help it through times of trouble. Of course, every business owner looking for finance would like the best deal possible, but if that is the case, what is important is not to wait until the very last minute – as this makes it far less likely you will get a good price.

By applying for finance with three months lead time, businesses are far more likely to find the perfect match. Finding a finance partner when you are not desperate will mean you have access to a far greater amount of options.

Employment Is Booming, As Well As Your Business

There are better employment opportunities out there available to everyone, including businesses, and alternative business finance providers have played their part in that.

Venture Beat conducted a study and found that over 40% of companies would be using funding to hire people in the future. The increased availability of funding has allowed business owners to expand their teams and invest in the right candidates aswell as training and support for current staff.

So, with all of this in mind, it really does not come as a shock that banks are losing out to alternative business finance providers. They offer funding solutions that banks cannot and the flexibility, freedom and understanding alternative lenders provide means that they are now helping to empower businesses everywhere.

If you are experiencing cash flow challenges or want to realise your business growth plans, get in touch with our team of Funding Specialists today on 020 3666 1164 or email [email protected].





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