High street banks lack speed and agility required for SME finance

The number of SMEs rejected for finance by mainstream lenders such as banks has risen by 5% since 2015.

One in six SMEs reported being turned down by a mainstream lender in a survey by specialist lender Amicus. Nearly a third (31%) of SME owners reported that their inability to secure finance terms with a mainstream lender meant they had lost out on a business deal or investment opportunity. As a result, this has led to greater interest in alternative finance.

Key findings include:

  • Over twice as many small firms believe that mainstream lenders are unable to reach quick enough decisions (15%, up from 6% in 2015)
  • More than one in ten (12%) SME owners highlighted the inflexible lending conditions and 8% the insufficient knowledge and experience as reasons for mainstream lender underperformance
  • Over half of SME owners (51%) believe that the greater flexibility offered by alternative finance providers makes them more attractive than traditional lenders, up from 45% in 2015
  • Greater ability to lend (46%) was second and longer payment terms (34%) was third
  • Speed (30%), specialist knowledge of their clients’ industries and challenges (29%) and more compelling payment structures (27%) was ranked fourth, fifth and sixth respectively.

SME owners predict that demand for alternative finance will increase by an average of 28% over the next two years, up from 26% in 2015 – with over half (51%) having reported to have already used alternative finance or considered using it.

Amicus CEO John Jenkins said: “It’s clear from this research that the demand for alternative sources of finance is continuing to grow in popularity. Mainstream lenders are falling short in terms of the agility and speed that is required by SMEs seeking finance.”