Access to finance is vital for businesses to grow. While traditional banks are still the “go to” for most SMEs, with higher rates of interest being proposed, we could see a sharp increase in businesses seeking alternative sources of funding and credit in the months and years to come.
We’ve seen some evidence of this increase already as alternative streams such as crowdfunding, leasing and asset based finance have become more popular.
Despite a period of fiscal uncertainty, according to the Federation of Small Businesses Small Business Index (SBI), small firms are currently positive about their ability to access finance. In fact a record number of SBI respondents (74.5%) were successful in their applications for credit in the first quarter of 2017.
However, the proportion of companies able to access rates below 4 per cent stood at 27.8 per cent, significantly down from 52.9 per cent in the same period last year, and the number of businesses being offered rates of between 8 per cent and 11 per cent increased in the past year.
As SMES look more closely at the affordability of their potential funding streams, they are turning their attentions to second tier lenders and alternative sources of funding such as crowdfunding, venture capital trusts or enterprise investment schemes. In fact, these could soon overtake mainstream banks as the preferred source of fast and flexible financing.
But a little knowledge can be a dangerous thing and, for businesses that are looking at a variety of funding options, knowing how best to assess and package them can be a bridge too far.
For specialist finance companies, like Pegasus Funding Resources, this is where they come into their own as they are able to deliver multiple solutions to meet the individual financial needs of companies, no matter where they are in their growth cycle. Not beholden to any particular stream or source, they can assess the best fit for the organisation, based on their individual circumstances. In fact, because they have multiple lenders at their disposal, they can even go so far as to negotiating heads of terms – in particular fees and interest rates – in order to create a feasible and affordable funding solution.
More good news for ambitious growing businesses.