Why SMEs should look to alternative lenders to fund their growth.

Traditionally, bank lending was the most common source of external finance for SMEs, but recently, banks have become reluctant to lend to certain sectors, particularly new, innovative and fast-growing enterprises, with a higher risk-return profile. Funding gaps can be a challenge for companies wanting to undertake major transitions, such as management buy-outs (MBOs) or Management Buy-Ins (MBIs).

Rather than accepting credit constraints as “the norm”, it becomes increasingly important to broaden the range of funding options available, to ensure entrepreneurs can continue their role in contributing investment, growth, innovation and employment.

There are now more than 100 alternative finance providers offering a range of options. These include asset-based lending, peer-to-peer lending, alternative debt, venture capital, and equity or a mix and match package of the above.

The proliferation of choice makes the role of an informed broking professional more vital than ever in ensuring that SMEs have access to the finance they need and are guided towards to the most appropriate solution. The broker community now facilitates more than £1 billion worth of SME borrowing every month.

Technology versus the human touch?

Modern technology has made incredible advances in loan processing and it’s partly due to this that the alternative finance market has exploded at the rate it has.

But personal relationships remain vital in the world of business funding. Back when businesses would automatically turn to their bank manager for a loan, that trusted figure would make capital available (or not), based on a long-standing knowledge of the company, its founders, and the local economy.

Nowadays, SMEs with under £1m turnover are unlikely to get access to a bank manager at all and can often find themselves limited to call centre access.

So, the personal touch is now more likely to be fulfilled by an intermediary like a broker who gets to know the ins and outs of their client’s business, their story and their aspirations.

At Charlesworth we can help you get access to the finance that you need, speak to us today on 01484 506250.