I feel a change comin’ on

After months of planning we are delighted to have launched the new portal for small and medium-sized business owners, alternativebusinessfunding.co.uk

Seven of the UKs largest and most dynamic alternative funding providers (Crowdcube, Funding Circle, MarketInvoice, Platform Black, Seedrs, Zopa and pensionledfunding.com) have come together to collaborate and help change the business funding landscape for the better.

I will happily stick up my hand and admit that I have been somewhat of a driving force behind this initiative to date. Without preaching on this, working with business owners to try to help them finance their businesses in such a way that they retain as much control as possible, is something of a mission for me and my colleagues at Clifton.

Control can come in many different forms and in this case control means choice. Real options. Finding the most appropriate solution is often difficult and even figuring out who to contact can be a challenge.

Not so with our simple traffic light interactive process, which quickly and efficiently leads the business owner to a starting point for their funding journey.

This will grow. From the seven of us in the initial launch I anticipate that others will join. Other lenders, including most importantly the large banks, will feel comfortable telling those customers that they can’t help, “try this”, and point them to the portal.

It is early days, but the writing is on the wall, reinforced by Business Secretary Vince Cable’s assertion that small businesses still face problems with banking.

“SMEs feel they have too few lending options other than the big four banks, which is not healthy for the economy,” he said.

We hear you Vince and we are doing something about it.

Alternative finance grows up?

One of the most perplexing elements of the SME funding drought of the last five years has been the inability of anyone to put their finger on the “real problem”.

Is it simply that the larger banks are unwilling to lend to small business? Or maybe that the pool of creditworthy businesses to lend to is shrinking? Is it a lack of confidence and thus demand for credit? Or maybe the whole process is so tortuous and time-consuming that many business owners just give up their quest in disgust and frustration? The answer is – it is a bit of all of these and maybe more.

What we do know is there is still a significant and diverse pool of businesses which are in the market for some form of finance for a multitude of reasons, and that these businesses simply won’t fit the criteria of their existing lender/s and thus the cycle of frustration begins.

And so the world of alternative finance has come alive. New models, new approaches, new outcomes and new issues.

The much whispered speculation that one of the highest profiled of these new models, the peer-to-peer lender Funding Circle, will do a deal with Santander to receive leads from the behemoth where the bank can’t or won’t provide financing to the business in question, is an excellent example of this new approach.

In fact, this type of collaboration (much promoted by Clifton through our pensionledfunding.com brand) opens up tremendous possibilities to UK business owners.

Samir Desai, one of the three founders of Funding Circle and a Boston Consulting Group alum, makes it clear that he regards this kind of collaboration as evidence of a maturing marketplace, where all stakeholders accept that sharing information and risk benefits our own businesses, and, most importantly, the millions of UK SMEs currently under stress.

Going forward it is these businesses that are the real engine of growth in the UK economy.