Banks are on the back foot in their competition with alternative lenders, new research has shown. That is because almost half (45%) of small businesses say that emerging sources of finance are much more flexible.
In a survey of UK small business leaders, short-term lending specialist Amicus found that a quarter think that non-traditional finance providers beat banks on customer service, while another quarter rate them more highly on sector knowledge and 22% preferring their speed.
It is likely that recriminations are influencing bosses’ views, as 32% of respondents report that they have lost out on a deal or investment opportunity because their chosen bank was unable to meet their borrowing requirements.
This is spurring a gradual shift in affections for people in charge of young and growing companies. Indeed, more than 40% of small firms say that they have at least considered using alternative-finance sources over the past five years.
Some of the most popular routes that they have explored include crowdfunding, invoice financing or factoring, commercial mortgages and asset finance.
There are signs that the shift will become more pronounced as time goes on. As SME discontent with mainstream banks continues, almost two-thirds of the respondents (64%) predicted that demand for alternative finance will grow in the next two years.
Amicus CEO John Jenkins said: “Many small firms tell us that speed of execution can make all the difference when there’s an opportunity on the table that needs a quick turnaround.
“Given the challenges faced by banks in recent years, it’s little surprise that many small business owners feel they’ve have missed out on exciting deals and growth opportunities due to a lack of support.”
He added: “Most business owners who have turned to alternative lenders discover that dealing with them is a breath of fresh air – and that’s why they are continuing to gain popularity.”