Every year, tens of thousands of small businesses see their loan applications refused by the big banks. With requests totalling £4 billion, SME growth is becoming significantly stunted and their forecasted £241 billion contribution to the British economy by 2025 increasingly unachievable.
While there is a growing range of alternative funding routes to choose from – including factoring, invoice discounting, asset finance and peer-to-peer lending – a worrying 38% of SME owners questioned for one report said that a loan request rejection from a mainstream lender would see them not knowing where to turn and giving up on business plans.
So as a provider of alternative finance to SMEs, we’re working hard to ensure that the UK’s 5.7 million small to medium enterprises are aware of the many other finance options available to them.
How aware are SMEs of alternative finance options?
In a recent report by the British Business Bank on SME awareness of different finance options. Last year, 86% if those questioned said they understood asset finance, a figure that has remained somewhat static over the last five years. Yet only 53% are aware of invoice financing and factoring – with little growth since 2012.
The greatest increase in awareness is, however, of crowdfunding platforms – up from 13% to 60% in the last five years. The next biggest jump in understanding was of peer-to-peer lending platforms – from 24% to 47% over the same period.
Alternative options from Reach Commercial Finance
We’re experiencing phenomenal growth with our alternative finance products – with our client base increasing by 80% in the last 12 months and raising £15 million in funding. We’ve also seen a 35% increase in invoice finance completions in the last year and a half. This is significantly higher than industry-wide stats, which show pure invoice finance lending figures reaching £18.93 billion at the end of Q4 2017 – an increase of 0.25% on the previous quarter.
It is also very diverse with many clients involved in manufacturing, distribution, recruitment and construction, however we are by no means limited to these sectors. They also include strong, established firms with great ideas, as well as those who are experiencing some levels of financial stress. However, they all have one thing in common – a requirement of a provider with the experience, contacts and expertise to broker the best package for their needs.
Here’s how a combined invoice and asset finance facility brokered by Reach saved an Isle of Wight-based construction company.
Reach Commercial Finance was recently approached by a general construction and groundworks firm in the Isle of Wight. It had been operating for 15 years, enjoyed a turnover of £2.5 million and employed 35 people.
However, the company began to experience some financial difficulties (can we elaborate, Robin?). Mainstream finance options had been exhausted – the owner had invested some of his own funds and the bank would no longer lend – a problem which led to its approach to Reach partner Leonard Curtis Business Solutions Group (LCBSG) for financial support.
Working within our full-service operation – providing every possible area of support at each stage of an SME’s lifecycle – LCBSG referred the client to Reach Commercial Finance as it was the most suitable solutions-provider for the company.
Over a six-week period, Reach brokered a £1 million alternative finance deal – £600,000 set against asset finance and £400,000 from an invoice factoring facility. As a result, the company was able to continue trading, jobs were safeguarded and the business is now on track to double its turnover – to £5 million – over the next five years. Anchor
The finance facility designed by Reach maximised cashflow by releasing funds tied up in a wide range of valuable assets as well as from its unpaid accounts.
As well as negotiating and securing the deal, the Reach team also supported the client throughout the entire process.
It liaised with a number of potential funders before appointing Bristol-based Bibby Financial Services as the most suitable lender. Then with broker, funder, advisor and client working collaboratively, this most suitable and flexible funding solution was secured.
The client said: “We first approached Leonard Curtis Business Solutions Group for positive strategic advice and they referred us to Reach CF – its bespoke brokerage division. Our decision to then work with them was based on its agility and speed of response combined with the time and care the team took to really get to know us as a business.
“Their excellent relationships with lenders – and the number of contacts they have – meant that they were quickly able to find a funding match and solution to meet our exact needs.”
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