Small and medium-sized enterprises (SMEs) make up more than 99% of the business population and account for some 60% of all private sector employment. However, they continue to struggle to secure the business finance they need to grow.
Some 90% of the market for loans to small businesses is controlled by a handful of large banks. Evidence shows that, if their bank rejects their application for a business loan, many SMEs simply give up the search for financing rather than seek alternative options.
Unfortunately, many SMEs remain unaware of the wide range of funding sources available to them.
One of those alternatives is fintech marketplace lending. This form of finance was created in the UK, which remains at the forefront of developments. The UK accounts for about 77% of all European Union fintech lending volumes. Only China and the USA have larger markets.
Another source of funding is invoice finance, where a provider advances a percentage – for example 85% – of the value of the invoice. The provider then pays the remainder – minus fees – when the invoice is paid. This can enable businesses to speed up their cashflow cycle, but invoice finance can be expensive.
Equity funding can be appropriate for those that are able to put a value on the business and willing to give up a share. Shareholders may want to exert influence on the business, which can cause friction. A combination of debt and equity may be a good compromise for those who do not want to give away too big a slice.
Small businesses have access to a wide range of funding sources. However, too many SMEs think that their bank is their first and only port of call. According to the Federation of Small Businesses, just 24% of SMEs feel that credit is readily available.
LendingCrowd can offer loans from £25,001 to £500,000. Loan terms range from six months to five years, and borrowers can repay their loan early without charge.