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What are your options for business finance?

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.

Adrian Innes, Head of Origination at LendingCrowd, said: “Unfortunately, many SMEs remain unaware of the wide range of funding sources available to them.”

Fintech lending

One of those alternatives is fintech marketplace lending. This form of finance, sometimes called peer-to-peer (P2P) lending, 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.

Funding growth

Adrian Innes said: “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 has just announced an £18.75 million deal with Scottish Investment Bank and NIBC to fund SME growth. We are targeting a significant uplift in our lending, so we would encourage anyone seeking a business loan to contact us and find out how we can fund their ambitions.”

By connecting investors with SMEs seeking funding, LendingCrowd can offer loans from £5,000 to £500,000. Loan terms range from six months to five years, and borrowers can repay their loan early without charge. On average, a borrower can have the funds in their account less than 10 days after submitting their initial application.

Find out more about applying for a LendingCrowd business loan.

Article author

Gareth Mackie

Gareth Mackie

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If you invest through LendingCrowd you should understand that your capital is at risk.

LendingCrowd is the trading name of Edinburgh Alternative Finance Limited, Company Number SC468392, authorised and regulated by the Financial Conduct Authority (Firm reference number 670991). LendingCrowd and its products are not covered by the Financial Services Compensation Scheme.

Read more about the risk involved when investing and borrowing.

The company's registered office is 23 Manor Place, Edinburgh, EH3 7DX.

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LendingCrowd is working with the British Business Bank to help deliver CBILS loans to SMEs affected by the Covid-19 pandemic. Find out more: