Why Alternative Finance is booming today

Alternative options for finance are becoming more popular

Since small businesses have found themselves unable to obtain traditional loans from their high street banks, these businesses are turning to alternative finance providers for a new way to fund their business.

The 2008 crash affected many businesses, with fewer casual consumers since the unstable economic downturn. Enterprises have found it hard to obtain funding from banks, who are less likely to offer finance to small businesses.

Alternative lenders are replacing the need for high street banks, because of their flexibility and business orientated products on offer. These lenders are able to supply better terms, simple applications and quick decisions, creating an entirely new lending experience for businesses. The best providers are using the increased efficiency to offer their clients a more personal experience.

Today, small enterprises have a variety of means to access funding, including overdraft facilities, invoice financing, merchant funding and secured/unsecured loans. Each of these products will suit different businesses for a range of reasons, and most are designed for businesses that have had little luck with the banks. These new products make use of less traditional types of collateral and new types of information, to provide a more flexible source of finance.

The government has continued to pledge their support to small businesses via a number of schemes, such as the Investment Programme Scheme and the Help to Grow Scheme. These initiatives have been poorly advertised and have not been used to their full potential: in 2014 the funding available was extended to £400m, but only 40% of this was used.

Alternative finance providers have led the way for funding and customer service for small businesses. This is shown in the Global Retail Banking report published in recent months. Views on obtaining finance as a business are shifting. The report stated that customers had a more positive experience with alternative lenders and if these trends continue, it won’t be long before these firms have the majority share of the customers.

Written on in Borrowing