Why alternative finance is an SME lifeline

New data shows that accessing finance is still a problem for the majority of SMEs. That’s why alternative finance services, such as invoice finance, are a lifeline.

According to the new figures from professional services organisation EY, securing capital remains a major barrier for SMEs in the UK, despite the various high-profile schemes introduced in recent years to stimulate small business lending. Half of all entrepreneurs questioned stated that concern over accessing finance was the biggest obstacle to building a business.

These findings underline the importance of alternative finance and explain why its emergence as a mainstream SME funding source has reshaped the small business finance landscape. As traditional lenders have remained cautious, services such as invoice finance, peer-to-peer lending and crowdfunding have stepped in to fill the lending gap, and have now established themselves as essential products, becoming integral to government SME funding strategy.

Illustrative of this sea change is the inclusion of alternative finance in the Forum of Private Business’ new Cost of Doing Business report. In the document, it gives advice for reducing costs and growing your business, and among its seven core steps is a recommendation for exploring alternative finance, explaining that from invoice finance, peer-to-peer lending and angel investment, there is a type of finance for every stage of business.

As the economic recovery enters a crucial period, in which building momentum behind business growth is essential to realising wider growth goals, it is clear that alternative finance will play role for SMEs and entrepreneurs.


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