SMEs show increasing demand for alternative finance as high street banks disappoint

Some 16 per cent of SME business owners seeking finance said they had been turned down by a mainstream lender, a figure up 5 per cent from the same survey in 2015.

And 31 per cent said their inability to secure finance terms with traditional lenders has led to a lost deal or investment opportunity, according to a new study by Amicus.

The researchers suggested high street bank frustrations have led to SMEs turning their attention increasingly towards alternative finance, including property finance, crowdfunding, invoice finance and asset finance.

The study exposed SME concerns over slowness around decision-making from mainstream lenders, inflexible lending and insufficient knowledge and experience as reasons for underperformance.

Some 51 per cent of those surveyed said the greater flexibility offered by alternative finance providers made them more attractive. This was up from 45 per cent in 2015.

SME owners predict that alternative finance demand will increase by an average 28 per cent over the next two years. More than half said they already use it or are considering it.

John Jenkins, chief executive of Amicus, said: “It’s clear from this research that the demand for alternative sources of finance is continuing to grow in popularity. Mainstream lenders are falling short in terms of the agility and speed that is required by SMEs seeking finance.”