Last year, we saw the alternative finance market grow to £3.2 billion with a range of different crowdfunding and peer-to-business lending platforms entering the space.
The traditional banks have their strengths, but they are not always cut out to cater for SMEs. The alternative finance sector is beginning to take an increasing share of SME lending through investing in new financial technology and a dedicated focus on responding to business growth and investment plans. However, there is still a lack of awareness amongst business owners of the alternative options available to them, particularly amongst women.
There is a surprising number of female business owners that decide to give up on their investment plans when their bank turns them down for finance. Research carried out on small and medium sized companies by Just Cash Flow PLC showed that one in three female business owners (35%) simply gave up when their bank initially said ‘no’ without looking at the other options available to them. This was in stark difference with the amount of men – where only 24 per cent stated they had shelved their investment plans when they had been rejected.
When asked why, 69 per cent of female business owners said this was because ‘they weren’t aware of alternative sources of finance’ and 95 per cent couldn’t name one local commercial broker that could advise them on how to secure business finance. This lack of awareness was also highlighted in a Government report on Women in Enterprise last year, which showed that female entrepreneurs often find it difficult to know where to go for support when their business needs investment to grow and that when they are directed, it is to government-sponsored options of which they might not always be eligible to apply for.
Now that we are operating in such a vast world full of finance options, to hear these statistics is concerning. In my job at Just Cashflow, an alternative lender for SMEs, I speak to different business owners every day and it always surprises me how complicated and lengthy their experiences have been with their banks just to get an answer. Alternative finance providers, like ourselves, are investing heavily in financial technology to change this – allowing businesses to know in just 6 minutes if they qualify for the type of finance facilities on offer.
Alternative finance offers entrepreneurs what banks struggle to – a quick, seamless and uncomplicated system that is perfect for those on the go, or the many woman business owners trying to juggle family life as well as running their own company. Entrepreneurs, now more than ever, need flexibility and can’t always afford to wait for weeks to get an appointment with their bank and even longer to get an answer. New lenders in this space are giving businesses rapid access to finance in a matter of days, helping them to invest and develop rather than stunting their growth.
It is very important that SMEs are aware they have alternatives so that they can fulfil their growth ambitions.
Toni Evans, Head of Engagement at Just Cash Flow will be addressing attendees on the benefits of alternative finance at the Women in Business Expo in Birmingham on 24 June.