More businesses are looking beyond their banks to find the finance they need.
Figures released earlier this week show that lending from non-bank institutions including, peer-to-peer lenders, commercial finance brokers and asset-based lenders is increasing while traditional bank lending displays continued decline. It has shrunk by around 25% since 2011.
Funding for SMEs via leasing and asset finance has more than doubled in the same period with £17.4bn of funding advanced by asset based lender to UK SMEs in the year to June according to the National Association of Commercial Finance Brokers.
Even more unusual ways of backing business plans are also on the rise with peer-to-pee lending networks and similar facilities showing an 80% rise in lending.
Damon Walford, managing director of Invoice Finance at Aldermore, a British challenger bank, commented on the rise of alternative finance saying: “It is a shame that the traditional High Street banks are still reluctant to lend to SMEs, which are the lifeblood of our economy. The UK can only flourish if SMEs are given the backing to succeed.”
Since Alerdermore was established, in the midst of the global financial crisis, the bank has leant over £1.6bn to British SMEs.
“We’re committed to helping small and medium-sized businesses secure the finances they desperately need to grow their business,” said Mr Walford.
The National Association of Commercial Finance Brokers who compiled this data is due to meet with MPs and representatives from the British Bankers Association (BBA) on Monday to discuss the rising use of alternative finance.
Commenting on the situation, a BBA spokesman “While banks are open for business there are other ways to get finance. Bank finance is not always right for companies.”
Gross lending from banks rose slightly in the second quarter of 2013 according to the Bank of England, but overall, it showed that SMEs paid back £600m more than the £114.9bn they borrowed.