Three in four small business owners feel let down by traditional lenders, according to new research conducted by the ICM Group. More than 500 small firms were included in the survey and the results indicate that more and more SMEs are feeling frustrated with their bank and looking toalternative financing solutions.
While a majority of small business owners express confidence that their company will experience growth in the next two to three years, getting high street lenders to support that expansion is another story. Nearly a third of respondents believe their future business growth is being hampered by the current policy of traditional lenders and half believed their bank was not even interested in their business.
Cashflow is a perennial problem for SMEs and one to which traditional lenders are failing to respond adequately, according to the survey. Twenty per cent of those interviewed said their business experienced a shortage of cash at least once every month, but they did not believe traditional lenders were offering viable solutions.
Among those finding cash drying up regularly, twenty per cent had sought a loan in the previous two years but only half of those had been successful in their application. These results show that traditional UK lenders are failing to offer much needed short-term credit with the kind of flexibility required by SMEs.
The Obstacles to Lending
When small business owners do apply for loans from traditional lenders, the amount of paperwork required for even small sums can be daunting. Even when a loan application is accepted, it may only be for a fixed-term loan without the kind of flexibility required by small businesses whose cashflow fluctuates from month to month.
SMEs Look to Alternative Lenders
With these survey results in mind, it’s little surprise to find SMEs increasingly turning to alternative lenders to support their business growth. Non-bank lending to small businesses is at its highest level since 2008, and the alternative lending sector looks set to grow even more in 2014.
The growth of alternative and more flexible forms of lending means small business owners can now shop around for deals better suited to their business needs. As this competition continues to shake up the lending sector, the prospects look good for SMEs nationwide.