Why small businesses in the UK are turning towards alternative funding

Jürg Widmer Probst

Why small businesses in the UK are turning towards alternative funding

Jürg Widmer Probst - alternative lending

COVID-19 is putting UK small businesses under immense pressure. Now that the country is into its third major lockdown, this pressure increases day by day. Alternative lending could be the answer to help small and medium enterprises (SMEs) through this extremely challenging time.

Alternative funding platforms aim to provide SMEs with the funding they need, helping not only to survive but grow.

Alternative lending could help small businesses to survive COVID-19

Staying afloat and stabilising income and cash flow are the main priorities for small businesses. The challenges created by the pandemic and Brexit mean that SMEs have, for the most part, had to shelve growth plans to concentrate on surviving.

Now, small businesses must find alternative forms of funding to see them through. Traditional banks are notoriously risk-averse when it comes to supporting small businesses and appeals for funding by business owners often comes to nothing. However, alternative lenders can be the lifeline that small businesses need.

Small businesses in the UK underpin the country’s entire economy. Without a thriving community of SMEs, there will be even more problems ahead for a country that is now out of the European Union and has one of the highest COVID-19 death rates in the world.

Big opportunity for Fintech alternative lending platforms and banks

It can be difficult for small business owners to find much cause for hope from the global news cycle. However, there is now a massive opportunity for innovative alternative lenders to ally with the SME community.

Times of economic recession are often periods of great innovation within business. Some of the biggest corporations in history began during times of economic downturn. These include the likes of Uber and even Microsoft. The reasons for this may sound counter-intuitive, but successful business innovators can learn much faster from difficulties in the business cycle than from easy success.

To successfully make it through economic downturns, entrepreneurs are forced to be fully flexible, innovative, agile and creative. All of this adds so much to a small business’s arsenal in the battle for financial success.

Challenging times for small businesses everywhere

Making a success of a small business is always challenging, even during easy economic times. Starting a business, running it and turning a profit takes hard work, creativity and a constant drive to make a success of it. Add in a pandemic and a period of sustained global and economic instability and it becomes even more difficult.

According to the Independent, more than 250,000 small businesses are on the verge of collapse as of 11 January 2021. And there is an obvious lack of confidence among small businesses, waiting to see how the pandemic finally plays out. However, the positive news is that there is a vaccination programme now underway, which is offering a ray of light.

Entrepreneurs need creativity and courage and business acumen to continue operating during times like this. And while COVID-19 is the biggest challenge many SMEs have had to face, but many are finding ways to forge ahead. And part of the support they are finding is alternative lenders.

Individually, most SMEs don’t want or need enormous amounts of funding. However, this makes them even less attractive to traditional banks as lending prospects. And, of course, banks have clamped down on lending during the last decade or so due to regulatory changes.

Government assistance not enough for many small businesses

The UK Government did introduce specific lending schemes designed to shore up small businesses during the pandemic. These include the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme. However, recent figures show that some have missed out on funding, with only £18.5 billion approved.

Thousands of small businesses are waiting for loans that have been held up by red tape, technical errors and various delays. Without funding, small businesses simply can’t grow, and will add to rising unemployment.

This is where Fintech alternative lenders come in. As they are much smaller, more flexible and more in tune with the needs of small businesses, they’re better placed to lend funds. Traditional lenders have long drawn-out application processes, while many challenger banks are fine tuned for speed. Without the cumbersome legacy systems of banks and traditional lenders, Fintech alternative lenders can speed up loan applications.


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