Nearly a Third of SMEs Lose Deals Due To Funding Issues, says Survey

A survey by commercial finance company Amicus shows that 31% of SME owners say have missed business deals or investment opportunities because they failed to get finance from a mainstream lender.

Pushing Borrowers into the Arms of Alternative Lenders

Research by Amicus shows that small businesses are still struggling to get loans from banks. The survey revealed that 1 in 6 small businesses (16%) had seen their applications for bank loans refused in the last year, which marks a noticeable increase from last year’s figure of 11%.

Luckily for SME owners, there are more sources of alternative funding than ever before: property finance, peer lending, crowdfunding, invoice finance and asset finance, for instance. With banks seemingly still unwilling to back many small businesses, it’s unsurprising that alternative lenders and funding sources represent an increasingly attractive choice. 51% of SMEs surveyed had used or considered using alternative finance – up 9% on last year’s figures.

Asked what model of alternative lending they favoured:

47% chose crowdsourcing finance, including peer-to-peer lending and crowdfunding
32% chose cashflow/invoice finance
29% opted for property finance such as bridging loans and commercial mortgages
24% preferred asset finance

Amicus’s survey also suggest that while SMEs may be being forced into the arms of alternative lenders, many of them aren’t; that worried – believing alternative lenders may be a better choice anyway…

Mainstream Lenders: Too Slow and Set in Their Ways

The survey shows that concerns over banks’ slow decision-making has increased dramatically, with 15% of the businesses surveyed saying they feel that the speed of decision making amongst mainstream lender is a serious issue – last year, this was a concern for just 6%.

Other concerns voiced by SMEs about mainstream lenders were a lack of flexibility in lending conditions – a frustration for 12% of SME owners – and, worryingly, insufficient knowledge and experience, highlighted as a concern by 8% of respondents.

But is the performance of alternative lenders any better?

Alternative Lenders: Quicker Decisions, Greater Flexibility

It seems that many SMEs believe alternative lenders are not just more likely to offer finance, but perform better too. When asked why they felt that alternative lenders were a more attractive proposition:

51% of the SME owners surveyed mentioned the greater flexibility offered by alternative finance providers (up slightly from 45% in 2015).
46% said it was the greater ability to lend
34% believe alternative lenders offer longer payment terms
30% felt that the loan process is more speedy with alternative lenders
29% felt alternative lenders have better specialist knowledge of their clients’ industries and challenges
27% said that alternative lenders offer more compelling payment structures

John Jenkins, chief executive officer of Amicus, said: “This research shows that the business finance landscape continues to change. Demand for alternative finance is set to go from strength to strength over the coming years as mainstream lenders struggle to evolve to adequately support a thriving small business community. Small businesses are increasingly turning to specialist lenders who have the skills to understand their specific needs.”