Alternative finance is replacing bank lending for start-ups / SME’s
The Bank of England has just released the latest figures for its FLS (Funding for Loans Scheme) and the figures really do speak for themselves. With a decline of £0.2bn in the last quarter of 2015, we have sufficient evidence to show that the banks simply aren’t providing for smaller enterprises anymore. Crowdfunding, P2P lending and alternative finance have stepped in to provide access to the finance they so desperately need.
For some of us this doesn’t come as any real surprise. P2P and alternative lenders continue to offer other routes at competitive rates. Funding Circle has lent over £1.1bn and RateSetter £1.074bn, not to mention that Ratesetter boasts an impressive £0 lost to investors to date. Bypassing the banks has never been easier with a whole range of products offered by a variety of companies. Not only are you getting an alternative, you are getting choice. Many lenders specialise in a specific field, meaning that they have experience and knowledge in that market. This means a clear and fair decision; they consider other factors the traditional banking systems wouldn’t look for. Decisions are made by industry experts, not by an un-personalised algorithm.
In addition Equity Crowdfunding platforms have seen a huge increase in demand with millions coming through in investment for companies. With the rise of the industry businesses are now able to see that there are alternatives to the banks, and this is exciting! Start-ups get a chance to get on their feet and get the finance they need. What more could you want? Growing businesses mean a growing economy.
The decline in lending shows that banks have little appetite to provide for small enterprises, whilst alternative lenders are prepared to consider SME s on a case to case basis. Businesses now have options – they needn’t have to take on the scare factor of the bank only to often be faced with a rejection. More and more SME’s are now looking away from the banks and considering the products and services offered by the alternate market and it’s understandable. A no from the banks no longer means a no to finance.