More SMEs seek alternative finance than a bank overdraft although majority don’t need finance
More small businesses in need of funding sought alternative finance rather than a bank overdraft in the last 12 months according to new research by One Poll for small business funder Liberis, and only marginally more sought a bank loan.
While 70% of small businesses haven’t applied for funding because they say they ‘don’t need it’, the research amongst 1000 small companies, showed that 30% of those that did applied to an alternative funding provider, compared to 18% that applied for a bank overdraft and 31% for a bank loan. Just 15% applied for a business credit card. The most popular alternative finance was peer-to-peer funding, followed by crowd funding.
Overall, nearly 7 in 10 (68%) got all funding they needed, 21% got part of it, but 10% were still turned away causing cash flow problems and a missed opportunity for growth. Sixteen per cent of respondents didn’t apply for funding at all because they didn’t think they’d get it.
Paul Mildenstein, CEO, Liberis, said: “This is further evidence that bank funding is losing its significance amongst small businesses as they become more aware of the range of non bank funding models available to them. As a sector though we must continue to improve knowledge and understanding; 9% of those surveyed still said they hadn’t heard of or didn’t know what alternative finance was.”
Cost perceptions of alternative funding were mixed; nearly a quarter (24%) think it’s cheaper than bank funding and 21% think it’s more expensive.
Other findings from the survey were:
– The internet and social media were the most popular sources of funding information
– The average time spent researching business finance sources is 3.5 hours
– The average number of funders approached is 3
– The average amount of funding required was £13,130