The Funding for Lending Scheme has hit the headlines in recent weeks, with it initially being extended by two years, and more recently with challenger banks calling for the scheme to be made permanent. The scheme was intended to encourage banks to lend more to small businesses, and whilst the scheme is now set to be phased out gradually until January 2018, it has been reported recently that Britain's challenger banks will meet Treasury officials to press for the Funding for Lending scheme to be made permanent.
However, amid all of these headlines, we wanted to understand how SMEs go about finding alternative finance. In a recent OnePoll study, we found that, shockingly, only 36% of SMEs would go to their bank for funding and would completely trust the advice and options given to them. The results also revealed that almost a quarter (23%) of SME owners would actually go it alone and try to find the best financing options for them without seeking the advice of third-party individuals.
Whilst it’s great that the Funding for Lending Scheme is a route to finance for small businesses that is being kept open for the time being, our results indicate that there is still much confusion around the financing landscape. More needs to be done in the way of education before focusing on opportunities that businesses aren’t fully aware of.
With so many alternative finance options and funding schemes emerging, SMEs could be forgiven for not completely understanding this complex market. With a dizzying amount of headlines and a record number of alternative finance platforms setting up shop, it can often be difficult for time-strapped small business owner to get to grips with the solution best fitting for their business. As we move into 2016, it’s incredible to find that 7% of SMEs still admit to not knowing where they can get access to finance, or advice for funding.
Help to the rescue
As the various finance providers have emerged, so have specialist online advisors. Yet only 5% of SMEs know about these aggregators or comparison sites. Being left in the dark over funding simply isn’t acceptable in today’s financial market. With 73% of SME employers aiming to grow their business over the next two to three years, small businesses should be able to easily harness the advice available to them in order to gain quick and easy access to funding that is the right fit for their business.
Taking a careful and considered approach when setting out to gain funding is vital, and once you’re aware of the options, it’s hard not to become over-excited and get carried away. But as the rise in platforms has shown, it’s a competitive market. Being able to input your core business figures and curate the right solution calculated for you takes the pressure out of accessing funding, and leaves you safe in the knowledge that an unbiased result will be offered to you, almost instantaneously.
Whether peer-to-peer financing is the best choice for you, or invoice financing is the best solution for your particular needs, intermediaries are there to take the stress and hassle out of securing that much needed cash. Before we begin to extend programmes already in place, it is vital that SMEs understand the options available to them, and which best suit their business. If SMEs can ensure that they have their financial documents prepared, have a solid business plan in place, and a realistic expectation, the stress and worry of securing funding can be taken care of and solved quickly and efficiently.