Taking a different route to alternative lending

Flexible working capital can be crucial for SMEs looking to reach their goals and succeed as a business.

And there has been much talk of small businesses turning away from traditional lenders and looking at alternative funding streams in the wake of the financial crisis.

However, research commissioned by alternative finance provider Growth Street has revealed that North West businesses are still dependant on traditional banks.

A survey of more than 1,100 SMEs found that a majority of respondents in the region had only considered their bank when thinking about accessing cash to fuel growth.

Responses to the survey on exports and finance also revealed a lack of awareness of alternative finance providers – with 71 per cent saying they weren’t confident about knowing what funding is available.

Growth Street chief executive Greg Carter said: “The figures should be a wake-up call for government and financial advisers.

“SMEs are struggling to access finance through traditional avenues, as a result of bank closures and the continued restraints on lending to small businesses, which contribute to the stark fact that around half of small businesses fail by year five.”

Despite this there is evidence that alternative lenders are making inroads – and that the awareness is growing.

The Manchester-based commercial finance arm of listed Secure Trust Bank doubled its lending balances over the last 12 months, funding in excess of £1bn in customer invoices during that period.

Its interim financial results show that lending balances have risen to £187.5m in the year to 30 June 2018, up on the £94.2m seen the previous year.

Secure Trust Bank Commercial Finance offers a full suite of asset-based lending solutions to support growth, ranging in value from £1m to £50m.

It provides funding for a range of situations, including management buyouts and buy-ins, restructurings and turnarounds and service-led refinances.

In May, the company announced that it had funded more than £2bn worth of client invoices since inception in September 2014, which placed it firmly in the top 10 independent providers of alternative finance in the UK.

Since the start of the year, Secure Trust has worked on transactions across a broad range of sectors. This includes providing a £15m funding line to high street fashion chain Jigsaw, as well as a £35m facility to steel stockists Meridian Metals.

Commenting on the results, managing director John Bevan said: “Alternative finance continues to represent an extremely attractive proposition for SMEs looking to unlock growth across the country, many of whom require a flexible and tailored proposition when it comes to funding.”

Nick Smith, sales and marketing director of SME funder Reward Finance in Manchester and Leeds, believes it is time to drop the ‘alternative’ tag as asset-backed business funders compete head to head with traditional lending.

He says: “Asset-backed business funders, like ourselves, have become increasingly popular, as companies turn to us for much needed cash. And, we are now often the ‘first port of call’ for a growing number of companies.

“That’s because there is now a great deal more understanding in the marketplace about the funding solutions we offer.

“For example, the stigma that used to be attached to invoice finance has been removed.”