Why are younger SMEs more willing to consider alternative finance?

Nearly half of all SMEs in the UK formed after 2010 have revealed they would consider seeking investment from friends and family if their business needed it.


Business Banking Insight data has revealed that alternative sources of finance are more appealing to younger firms than they are to ones formed before 2000.


Whereas banks were once the main port-of-call when searching for finances, the new figures suggest that situation is no longer the case.


Instead, options such as crowdfunding and seeking money from friends and family are more prevalent as they provide a greater deal of flexibility.


Some 42% of businesses formed in the last five years said they would have no issue with approaching friends and acquaintances for cash if it would support them.


Of those businesses, 64% would also turn to friends for financial advice and guidance which compared to 45% of owners from businesses formed pre-2000.


Slightly more than a third of post-2010 SMEs would consider peer-to-peer lending, which is double the amount of companies from before 2000 that would do likewise.


Many variations exist between old and new firms when it comes to sourcing financial guidance, with younger firms taking a different approach to older ones.


For instance, 52% of firms from the last five years would consider the use of a mentor, compared to 29% of companies that were formed before 2000.


A similar trend existed when it came to using financial advice websites, as 56% of younger SMEs would use such sites, compared to 32% of companies from 2000 or before.


Every business relies on finance to expand which is why it is really important that they know what options are available to them.


A failure to use these options could leave them in financial difficulty or may slow growth, potentially even leaving them in need of corporate recovery in the most severe situations.


Those in difficultly are advised to seek assistance from insolvency practitioners in London to determine what support measures might be available.


By Phil Smith


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