8 in 10 SMEs still prefer traditional bank loans over alternative finance

New research reveals that SME finance directors still prefer their banks to other forms of funding. Here's why.

With over a decade’s worth of success stories and aggressive marketing, alternative finance arguably secured itself as a mainstream option for business funding in recent years. Yet new research suggests that SMEs are still reluctant to take a chance on certain alternative finance options.

Research from an independent senior recruitment specialist firm, Tindall Perry, reveals that 74 per cent of finance directors describe their knowledge of alternative finance as average or above. However, only a quarter said they were comfortable with accessing crowdfunding or peer-to-peer lending.

In contrast, 85 per cent of companies said that they understood how best to access asset-based lending (ABL), while invoice finance, trade finance and venture capital all saw a positive response rate of between 55 and 75 per cent.

Despite this, traditional bank lending remained the funding of choice for financial directors, with 83 per cent suggesting that they would approach their bank for finance in the first instance.

Tindall Perry’s ‘View from the Top’ survey collated responses from over 200 SMEs to explore attitudes towards business funding. According to the firm’s MD, Leyla Tindall, the results undercore the fact tat the awareness may be there, but financiers now need to instill confidence in SMEs that there are viable funding options outside bank loans and overdrafts.

“In recent years, the benefits of alternative finance have become increasingly apparent to businesses across the country, particularly when helping our SMEs to unlock growth. However, in many instances there remains a disconnect between awareness and understanding,” she said.

“For most finance directors, that lack of understanding prevents them from accessing peer-to-peer and crowdfunding platforms, which could be having a detrimental effect on growth.”

“Having the right management team and financial advice is crucial when it comes to accessing funding, as well as developing the best training plan to ensure knowledge gaps are plugged.”

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

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