Research by Funding Options has shown that British SMEs are using more than £75bn in alternative finance on an annual basis.
This means there has been more than a 40% increase in the usage of alternative finance over a period of a year. Asset finance has become a particularly popular form of alternative finance as traditional funding from the banks to SMEs has declined in recent years.
Conrad Ford, the chief executive of Funding Options has said:
“Alternative finance has now passed its tipping point. It is now used by a huge number of small and medium enterprises in every sector of the economy, and is closing the gap with bank lending. It might be alternative in name, but it’s now completely mainstream.”
Ford has stressed that SMEs now have a diversity of ways to secure necessary funding. As a result, companies like ourselves at DJB are in an ideal position to provide advice to finance directors if required.
In 2011, the amount of conventional finance stood at almost £200bn. Three years later, it had dipped to approximately £170bn. The latest statistics have shown a further fall to beneath £165bn, so the trend does seem to be clear.
Funding Options has explained the fall in conventional finance in terms of stricter bank regulation. This has meant that other types of lending have perhaps been ranked as less risky than making ordinary loans to SMEs. The popularity of mortgages for residential purposes and the size of loans to large corporations have been used as evidence of this claim.
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