The Business Alternative Finance Survey

Alternative Business FinanceBusiness Alternative Finance Survey

Cambridge University recently produced a report following research into the UK business alternative finance sector. The report talked about attitudes to alternative business finance, looked at awareness and how these finance sources can be accessed.

The findings, if you are a business owner, are actually quite interesting.

What Is Alternative Finance?

It is nothing strange, no black magic, no occult. The easiest way to think of alternative business finance is that it is any lending source that is not high street based. Think of the business lenders in the marketplace in 2008, the alternative lenders are those that have entered the market since then.

The Survey Results

Why Use Alternative Finance?

This was particularly aimed at business crowdfunding. This part looked at why businesses chose to use crowdfunding over more traditional lending.

The highlight parts for me were;

  • 91% of businesses that borrowed using crowdfunding said the process of applying for borrowing was easier
  • 94% were impressed with the speed of response and decision making
  • 86% said the terms and details were more transparent
  • 83% thought the service levels provided were much better

Compare this to only 55% of businesses applying because they thought it was cheaper than bank (or traditional) borrowing.

What this shows is that the days of waiting months for a loan decision is not the way it has to be. Businesses in the UK can access funding quickly, transparently and with decent service. What makes this more interesting is that cost is far less important. As small businesses we strive to differentiate and give our clients service, wanting the same in return is simply the way it should be.

Was Alternative Finance Your First Choice?

This one really got me thinking. Of the businesses surveyed, these respondents took out borrowing from a crowdfunder. Prior to taking out this finance the respondents had applied for borrowing elsewhere. By far the biggest place finance had been sought was from banks, the results were;

  • 79% had sought funding from their bank, only 23% had received an offer from them
  • 19% had sought funding from a Government or Public source, only 2% had received an offer of funding

There are more, but these were the stand out numbers. Let me tell you why…

79% of businesses had applied to their bank, of those only 23% received a positive answer. The question is why did the borrower still go elsewhere? This brings us back to speed, service and transparency. There is also the possibility that the finance offer received from their bank was too complex, not sufficient or asked too much of the borrower.

Remember that these statistics suggest it is not about cost. Something that I have seen for some time. As a small business there is too much to do to hang around, finance is too key and you need to get on. No surprise really then…

Awareness of Alternative Finance

This one was a surprise initially but did sink in after a cup of tea. When looking at awareness of alternative business finance 76% of businesses said that they were not aware of the alternative finance options available to them.

This high level of unawareness was surprising, however once I thought about alternative lenders not advertising and a general lower public profile then it does make some sense.

However, and this is the biggie… If 76% of UK businesses are not aware of what funding options exist, and the market is growing at over 250% each year, then the opportunity for UK companies to get the funding they want is immense.

By Dave Farmer

If you want more details on alternative finance and what it could offer your business then please get in touch on 01293 541333. If you have any comments about this post please add them above.

Dave Farmer is the founder of the award winning Lime Consultancy, a business finance specialist based in Sussex


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