Revenue-based Loans

Are the tables finally turning when it comes to SMEs requiring finance?

A new report conducted by, alternative funder, Liberis has shown that in the last 12 months more small businesses in need of funding are turning to alternative finance rather than a bank overdraft.

While 70 per cent of small businesses haven’t applied for funding because they say they ‘don’t need it’, the research amongst 1000 small companies, showed that 30 per cent of those that did applied to an alternative funding provider, compared to 18 per cent that applied for a bank overdraft and 31 per cent for a bank loan.

Despite 31% of SME owners still turning to banks for a loan, it’s the 30% that now sought alternative routes that is the most important stat and shows how far the alternative finance sector has come. Peer-to-peer funding was the most popular alternative type, followed by crowdfunding.

Overall, nearly 7 in 10 (68 per cent) got all funding they needed, 21 per cent got part of it, but 10 per cent were still turned away causing cash flow problems and a missed opportunity for growth. Sixteen per cent of respondents didn’t apply for funding at all because they didn’t think they’d get it.

Commenting, Liberis CEO Paul Mildenstein said:

“This is further evidence that bank funding is losing its significance amongst small businesses as they become more aware of the range of non bank funding models available to them. As a sector though we must continue to improve knowledge and understanding; 9 per cent of those surveyed still said they hadn’t heard of or didn’t know what alternative finance was.”

The responses when asked about the cost of alternative finance were mixed; nearly a quarter 24% thought it is cheaper than funding from a bank and 21% found it more expensive.

It is true that alternative finance can work out more expensive than using a bank (that’s even if they give you a loan) but the huge bonus with alternative finance is the flexibility and speed that is offered.

Other findings from the survey were:

  • The internet and social media were the most popular sources of funding information
  • The average time spent researching business finance sources is 3.5 hours
  • The average number of funders approached is 3
  • The average amount of funding required was £13,130
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