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5 Surprising Facts and Figures about Alternative Finance

Estimated Read Time: 3 Minutes

JESSICA LAMBERT , 27 January, 2023

In today’s age of technological advancements and a burgeoning entrepreneurship market, Small and Medium-sized Enterprises (‘SMEs’) are achieving growing success with their business endeavours. Last year, over 23 million SMEs throughout Europe generated €3.9 trillion in total revenue and employed around 90 million people. These numbers indicate that SMEs may now be considered as the backbone of a flourishing European economy.

However, approximately 60% of SMEs are uncertain about their potential to finance lasting growth, especially when banks are becoming more reluctant to provide loans to them. This reflects the need for accessing crucial funds, which is why more businesses are reaching out to alternative finance providers for their lending requirements.

Alternative finance has empowered SMEs by giving them access to an array of flexible and affordable financial solutions. With alternative financers providing more funds to SMEs than ever before, here are 5 facts and figures about the industry that are bound to surprise you:

1.    25% of small-scale businesses that apply for a loan to banks get their application rejected

According to The British Business Bank, around 100,000 loan applications by SMEs are declined by banks, amounting to a funding gap of £4 billion each year.

Small businesses require access to funds for a variety of expenses, for example: purchasing the latest equipment; carrying refurbishments; hiring more staff or investing in marketing.

However, in the cases where a bank rejects a business’ loan application, it could raise concern over future growth due to the business’ inability of securing finance for ‘essentials’. In this scenario, a business would opt for alternative finance.

2.    80-90% of small businesses that go bust state that it is due to poor cash flow (i)

Cash flow problems generally occur in business due to systemic late payments made by customers/clients, or a lack of quick access to finances. Additionally, 55% of SMEs find cash flow to be the biggest hurdle in their path to success while over 40% point to an increase in their working capital requirement compared to the previous year. Alternative finance offers flexibility and businesses are beginning to bridge their cash flow related problems with the increased access to finance the alternative lenders offer.

3.    Business overdraft lending provided by banks is down by 50% in four years

It has become apparent that businesses are not receiving the necessary financial support they require from banks. Due to this, many businesses have even resorted to retaining deposits to sustain themselves through the current financial instability. This means that they are unable to reinvest profits, reducing and affecting their growth.

4.    52% of SME owners are now familiar with alternatives to traditional banking (ii)

The days of SMEs automatically looking at the bank as their first and last option are long gone. The growth of alternative finance has given budding businesses access to a wider range of funding options with flexible and bespoke solutions tailored to meet their funding requirements.

However, SMEs are not opting for alternative finance just because they’ve been rejected for credit by the banks. Greater recognition of their flexible and tailored asset-backed or invoice finance planning services, offered by alternative finance providers, has also played a major role in this migration and meant that some businesses are now choosing alternative finance as a first port of call. However the is still more work to be done to raise awareness and increase access for businesses and improve the time they spend waiting to be approved for finance.

5.    The alternative finance sector in the UK is estimated to be worth £12.3 billion by 2020 (iii)

The conclusion of a recent study has suggested that SMEs are more likely to benefit from the potential growth of alternate funding sources over the course of the next five years, reaching a total net worth of £12.3 billion. So, if you are a business owner looking for funds to build your business, there has never been a better time to seek alternative finance.

Our products and services come with guaranteed expertise, honesty and certainty. If you are experiencing cash flow challenges or want to realise your business growth plans, take a look at our range of funding solutions and apply now to get started!






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