Businesses 'turning to alternative sources of finance', research suggests

21 Feb 2018

Research published by the British Business Bank (BBB) has suggested that UK small businesses are increasingly turning to alternative sources of finance to fund their plans for growth and expansion.

The BBB’s Small Business Finance Markets report found that many small firms are turning to specialist asset finance providers and peer-to-peer lending for funding, as opposed to big banks.

The value of small business asset finance deals increased by 12% in 2017, whilst peer-to-peer lending also proved popular, with its value rising by 51% last year. The value of equity investment also increased by 79%, the research showed.

Meanwhile, the report also revealed that over the last two years, only 1.7% of small businesses sought new loans – a ‘record low’ amount, according to the BBB.

Commenting on the issue, Keith Morgan, CEO of the BBB, said: ‘A core objective of the BBB is to encourage greater diversity of finance, so we welcome the growth in the uptake of equity finance and other alternatives to traditional lending.’

However, the Federation of Small Businesses (FSB) expressed concern over the low percentage of UK small firms who sought new loans over the last two years. Mike Cherry, its National Chairman, said: ‘We’re lagging behind the US when it comes to venture capital investment in businesses to the tune of millions. That has to change.

‘Lots of small firms simply aren’t up to speed on all of their options.

‘Small firms will often start their finance journey by speaking to the bank they’ve always dealt with, leading them down a more traditional debt route that won’t suit everyone.’