“8 of of 10 businesses previously refused a loan from their bank found the finance they need through the alternative commercial finance lending market” – Nesta & Cambridge University Report on Alternative Finance.
What is Alternative Finance?
You may of heard more and more about the term alternative commercial finance over the last eighteen months. In fact the alt-fi space has been born out of the frustrations of high street banks ceasing their traditional lending activities off the back of the banking crisis and subsequent economic ‘down-turn’.
Alternative Commercial Finance is usually defined as any type of finance other than that from traditional Institutions (i.e. Banks), to you and me, it is used to describe the huge new market consisting of both private, and public lenders, all with various unique products designed to suit the needs of small and medium sized business (SME) owners. Some products and lenders are more well-known than others. But, all tend to specialise in their own certain areas, sectors, purposes and business types;
“Humans are a resilient bunch, when one door closes, another opens…”
- The alternative business finance space has been born out of the frustrations of high street banking institutions ceasing their lending activities throughout the banking crisis and economic ‘down-turn’.
- Born from the frustrations of business owners and SME’s searching for monthly cash flow funding.
- The traditional market dried up, so the Alt-Fi industry simply filled the gap.
But how can it work for your business?
- Fast – It can raise capital and do so fast and without the usual fees, valuations, paperwork and legal implications.
- Unsecured – and away from the requirements of personal asset security such as a personal possession or your home.
- Wide Choice – It’s funding panel is diverse and THINK covers the largest panel in the industry and with more alternative financiers joining weekly it has led to the boom in alternative business lending. Competition is good, as it means cheaper rates.
The alternative finance space is exciting. Not just for the economy but more importantly a real viable, safe option for your business. An option that more and more UK business owners are adopting:
- In 2015 £1490 million was lent to around 20,000 SME’s though the Alternative market – In 2016 that figure rose to over 100,000
- Alternative business lending is now 13.9% of the commercial finance market (15.6% of new business)
The Growth of the Alternative Commercial Lending Market
- Peer-to-peer business lending represents a 99% year-on-year growth rate and 194% average growth rate between 2013-2015.
- Online access of alternative business finance has become an increasingly important channel of financing for entrepreneurs, start-ups and SMEs in the UK, promoting economic growth, creating jobs and fostering innovation.
- Year-on-year, the total online alternative business funding rose by 120% from 2014 and the total number of SMEs served increased by 185.71%.
- Peer-to-peer business lending (excluding real estate lending) is predominantly catering to small business borrowers, given the average business loan size stands at £76,280
- Data on transaction volumes between 2013-2015 show that peer-to-peer business lending platforms accepted, on average, 22.7% of loan applications