Alternative funders need to get their message out there and raise their profile with small business owners looking to invest in their companies.
[image type=”thumbnail” float=”right” src=”/wp-content/uploads/sites/2/2015/06/abf-website.jpg” alt=”Alternative Business Funding portal” info=”none” info_place=”top” info_trigger=”hover”]
That was the rallying call from Clifton Asset Management’s Adam Tavener after a new survey revealed nearly 70 per cent of small businesses said they would use alternative funders to raise capital.
The research revealed that figure rises to 94 per cent for SMEs with annual revenue over £1.1 million, according to the study by UK Bond Network.
Adam, behind the launch of the alternativebusinessfunding.co.uk (ABF) portal, said that while the alternative funding sector was “growing rapidly” it was dwarfed by the amount lent by banks to SME owners.
But that could be about to change. One key element of the new Small Business, Enterprise and Employment Act requires banks to refer those firms rejected for loans to online platforms which can introduce them to alternative funding providers.
Many find the traditional funding route blocked after being turned away by the banks, with first-time SME borrowers facing a 50 per cent rejection rate.
Soon SME owners could be looking to alternative funders first instead of automatically turning to the High Street banks.
Half of SMEs recognise alternative finance as creating new opportunities for funding, according to the UK Bond Network poll of 250 mid-market businesses.
But 42 per cent of businesses below the £1.1 million turnover threshold were unaware of the alternative options available to them, it revealed.
Adam said: “The UK Bond Network survey into alternative funders highlights a number of current issues. “Yes, the sector is growing rapidly but actually remains very small in comparison to the volume of lending to SME’s provided by the High street banks.
“We would definitely agree that there needs to be a greater level of awareness in the advisory sector, with many accountants and other business advisors having a poor knowledge of such specialist areas as crowd funding or pension-led funding, for example.
[blockquote]“Now not only will the banks be forced to refer their rejected applicants to the alternative sector, but the Treasury and Department for Business, Innovation and Skills (BIS) also want the new norm to be SME owners considering alterative funders as a first option, alongside the bank offering, which will rapidly spread a better understanding of the sector as a whole.”[/blockquote]
Read more about the survey here