A third of SMEs have missed opportunities due to lack of mainstream funding

Nearly a third (31%) of small and medium enterprises in the UK have missed out on a business deal or investment opportunity due to a lack of access to funding from mainstream lenders, a new report claims.

According to the report, by specialist lender Amicus, almost one in six (16%) of SMEs said they had been turned down by a mainstream lender such as the high street banks in the past year. This is up from just over one in ten (11%) who had been turned down at the same point in 2015.

The lack of access to mainstream finance appears to be spurring more and more smaller businesses to investigate alternative finance options such as property finance, crowdsourcing, invoice finance and asset finance.

More than half of SME owners (51%) now believe that alternative finance providers are more attractive than traditional lenders due to the greater flexibility they could provide. Only 45% expressed the same opinion in 2015. 46% cited a greater willingness to lend as a factor that made alternative sources more attractive and 34% were swayed by longer payment terms.

Other factors that SME owners preferred about alternative financers included the speed of decision and delivery of funds (cited by 30% of respondents), specialist knowledge of their clients’ industries and their special requirements (29%) and more attractive payment structures (27%).

15% of smaller business owners now believe that mainstream lenders are not able to reach decisions quickly enough, compared to 6% who said the same in 2015. 12% also pointed to inflexible lending criteria and 8% to a lack of knowledge about their industry and its challenges as areas where traditional lenders underperformed.

SME owners predict that the alternative finance sector as a whole will increase by 28% over the next two years, an increase from the prediction of 26% given last year. More than half (51%) said they had already used or considered using at least one form of alternative finance.

By Phil Smith

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