Small and Medium Enterprises (SMEs) play a significant role in the global economy. They provide employment, generate income, and contribute to economic growth. However, SMEs often face challenges in obtaining funding from traditional sources, such as banks. This has led to the emergence of alternative finance markets that provide SMEs with access to funding. In this article, we will explore how the alternative finance market can help an SME and why it’s important to use a financial broker.

What is Alternative Finance?

Alternative finance refers to non-traditional methods of funding that are available to SMEs. These methods include peer-to-peer lending, invoice financing, and asset-based lending. The alternative finance market has grown significantly in recent years as SMEs have looked for new ways to secure funding.

How Can Alternative Finance Help an SME?

1. Access to Funding

Alternative finance provides SMEs with access to funding that they may not have been able to secure through traditional sources. This is particularly important for established and early-stage businesses that may have an indifferent track record or collateral to secure funding from banks. Alternative finance can help SMEs to bridge the funding gap and access the capital they need to grow their business.

2. Flexible Terms

Alternative finance providers often offer more flexible terms than traditional lenders. For example, peer-to-peer lenders may offer shorter repayment terms or quicker terms than banks. This can be particularly beneficial for SMEs that need more time to generate revenue or have fluctuating cash flow.

3. Diversification of Funding Sources

Relying solely on traditional funding sources can be risky for SMEs. Alternative finance provides SMEs with the opportunity to diversify their funding sources and reduce their reliance on a single lender. This can help to mitigate the risk of default and ensure that the business has access to funding even if one source is unavailable.

Why Use a Financial Broker?

A financial broker is an intermediary that connects SMEs with traditional and alternative finance providers. They can help SMEs to navigate the complex world of alternative finance and find the funding that best suits the SMEs’ needs. Here are some reasons why using a financial broker is important.

1. Expertise

Financial brokers have expertise in the alternative finance market and can help SMEs to understand the different types of funding available. They can advise on the most suitable funding options based on the SMEs’ specific needs and circumstances.

2. Access to Multiple Lenders

Financial brokers have relationships with multiple alternative finance providers. This means that they can offer SMEs a range of options and help them to find the best deal. Brokers also have access to lenders that may not be available to SMEs directly.

3. Save Time and Effort

Navigating the alternative finance market can be time-consuming and complex. Financial brokers will save SMEs time and effort by doing the research and legwork for them. They can also help SMEs to prepare their application and ensure that they meet the lender’s requirements.

4. Negotiation

Financial brokers can help SMEs to negotiate the terms of their funding agreement. This can be particularly beneficial for SMEs that are not experienced in negotiating funding agreements. Brokers can help to ensure that SMEs get the best deal and that the terms are fair and reasonable.

Conclusion

The alternative finance market provides SMEs with access to funding that they may not be able to secure through traditional sources. Alternative finance can help SMEs to bridge the funding gap, access flexible terms quickly, and diversify their funding sources. However, navigating the alternative finance market can be complex, and SMEs may benefit from the expertise and assistance of a financial broker.

Financial brokers can help SMEs to understand the different types of funding available, access multiple lenders, save time and effort, and negotiate the terms of their funding agreement. By using a financial broker, SMEs can ensure that they find the best funding option for their specific needs and increase their chances of securing funding, which can help them to grow their business and contribute to the economy.

It is important for SMEs to explore alternative finance options and not rely solely on traditional funding sources. Traditional lenders may have strict requirements and criteria that SMEs may not meet, and alternative finance options can provide more flexibility and opportunity for growth.

However, it is also important for SMEs to be cautious when exploring alternative finance options. Some alternative finance providers may have higher interest rates or fees, and SMEs should carefully consider the terms of the funding agreement before committing to it.

In conclusion, the alternative finance market can provide significant benefits to SMEs, including quicker access to funding, flexible terms, and diversification of funding sources. Using a financial broker will also provide SMEs with the expertise, access to multiple lenders, time savings, and negotiation assistance that can help them find the best funding option for their specific needs. SMEs should carefully consider all of their funding options, including alternative finance, and seek the advice of a financial professional to ensure that they make the best decision for their business.

Here at Pegasus Funding, we’ve been helping SME businesses across different sectors with their financial needs for many years. We have access to an array of alternative funding options, and we’ll work with you to find the best solution to help drive your business forward.