60% of SMEs are shunning banks as ‘Alternative funding’ goes mainstream

The new data reveals nearly a third of businesses view external funding as vital if they’re to achieve growth, 24 per cent say without it their growth will be far slower and 12 per cent say it is the difference between survival and failure. Yet more than half of SME owners and decision makers admit that they aren’t confident that they would currently be able to get traditional bank funding.

Nonetheless the research reveals a sense of optimism among UK SMEs, with an expectation that alternative methods of funding will sit harmoniously alongside traditional financing methods in the future: only a third of SMEs believe borrowing will remain difficult, whilst 38% say alternative methods of funding such as crowdlending will be the future for businesses to access finance. Nearly one in three believe that banks will start lending again.

Graeme Marshall, Chief Executive at FundingKnight, who commissioned the research, said “The future funding landscape is set to be extremely diverse, with positive signs that it will spark not only growth but also confidence in SMEs. We firmly believe that alternative methods of funding, such as crowdlending, are set to become a mainstay of business growth in this country.

“SMEs need to be taking advantage of the multiple sources of funding available in the UK. By using both traditional and alternative methods of funding, SMEs are able to not only spread the risk of borrowing but also benefit from the advantages of each method.”

Second-hand luxury car trader Goddards Auto, founded in 2005, is a prime example of this new thinking on borrowing.

The company had built up an excellent reputation with its customers. But an increase in repeat customers meant the business faced the prospect of raising funds to buy enough stock to satisfy demand.

With the business having long since made the investment in the fixed overheads it needed to get started, and with the staff and systems already in place to service increased demand, doubling its stock could allow the company to effectively double its profits. Goddards Auto took a loan through FundingKnight, to which 98 investors contributed.

Eric Goddard, Director of Goddards Auto, said: “Peer to business lending offered us an appealing alternative solution to secure a flexible loan that suited our requirements and FundingKnight have been crucial in helping us to take this step. With this loan we can now supply the extra stock we need to convert demand into additional profits to ensure our future success and growth.”