According to the Institute of Chartered Accountants in England and Wales (ICAEW), some SMEs are still reluctant to seek alternative finance. 82% of small companies admit they would not use peer to peer finance, yet 41% of SMEs do not trust high street banks.
While there has been a noticeable shift over the last year in companies turning to alternative finance, there is still a long way to go before SMEs feel confident in looking at all the options.
Data from commercial finance provider, BDRC Continental, shows only 22% of small businesses were aware of crowdfunding in the first half of 2014, but the majority said they would not use that type of finance.
Many SMEs feel banks are providing a sufficient service, as further data shows that most businesses surveyed have had overdrafts and loans approved by banks.
With more and more alternative lenders cropping up, the range of options available to SMEs is its biggest ever. Director of BDRC, Shiona Davies, commented ‘This may be the start of a sea change in the way SMEs raise external finance. However, although there has been speculation that newer forms of finance such as crowdfunding are becoming more popular, at present actual usage by SMEs is very low at 1%.’
The move to alternative finance could be slow because unfamiliar systems and processes may deter SMEs that have been using traditional lenders since the beginning. However if banks are soon to be referring rejected customers to alternative lenders, we may start to see a rise of confidence in businesses looking elsewhere for finance.