Businesses which have an application rejected from an alternative finance supplier will now be recycled on a new platform.
The Alternative Business Funding portal will serve as a collaboration between seven alternative funders, which are contributing a reported 85 per cent of the market.
Equity offerings Crowdcube and Seedrs, peer-to-peer lenders Zopa and Funding Circle, invoice financiers MarketInvoice and Platform Black and pension platform Pensionledfunding.com are the businesses involved.
With 95 per cent of SME funding still originating from banks, the organisation believes that there needs to be greater, and more relevant, signposting of alternative forms of finance for companies. With banks at risk when it comes to referring companies to other forms of finance, the platform will allow funders to share and recycle applications depending upon what sort of finance suits.
The seven alternative funders have provided some £580 million to SMEs in the UK, creating a reported 80,000 jobs in the process. The portal creation starts a process which is hoped will result in Vince Cable’s British business bank acting as an intermediary and referring failed bank funding applications to alternative finance platforms.
Businesses looking for alternative finance will be asked to answer questions online, before being directed to what has been determined to be the most appropriate platforms.
Anil Stocker, CEO and co-founder of MarketInvoice, says that together the platforms are stronger and there is a definite need to educate businesses about the options available.
Speaking with GrowthBusiness on informing the market of MarketInvoice’s proposition, Stocker says, ‘When we launched [in February 2011] it was just about getting the word out there that we existed and our first inbound leads from businesses came from word of mount, referral and being written about.
‘Over the last three months we’ve set up three core channels. We have a direct business development team which profiles companies and sends them marketing materials before following up directly.
‘We also have a partnership referral channel where we work with accountants, law firms or trade associations to solve their clients’ problems. And finally it is also about brand building, so we’ll sponsor events and work with journalists who are working on pieces to get the message out there.
Stocker adds that in-bound interest is coming thick and fast and there is definitely demand out there.
More on alternative finance:
- Alternative lending market forecast to hit £1.6 billion by 2014
- Banks’ hesitancy leads to more considering alternative funding
- Five businesses using invoice finance to fuel growth
Government interest in the alternative finance market has seen a number of allocations made by the new business bank in platforms. One recipient, Funding Circle, received £40 million a year after securing an initial £20 million. The capital is set to be allocated alongside other peer-to-peer loans made on Funding Circle
Talking with GrowthBusiness, Funding Circle CMO and co-founder James Meekings reveals that the platform started talking to the government two or three years ago regarding the kind of things Westminster could be doing to help peer-to-peer lending.
‘One of the things we are trying to do is create a marketplace where anyone such as a person, family office or pension fund can lend to businesses,’ Meekings says.
The Funding Circle team, with James Meekings far fight
‘The challenge is that with a pension fund, which wants to deploy tens of millions of pounds a month, it is going to take a while to get to that scale. So the government’s ambition was to help us grow quicker, to the point where we can get private sector institutional capital going through peer-to-peer lending. That was their business case for starting to lend.
‘We are part of their Business Finance Partnership, whereby the government committed £100 million to help non-bank funders lend. We took £20 million of that, which was on a two-year programme, and were very pleased that within a year we had lent all of that to just short of 2,000 businesses – with government lending about 20 per cent on average of every loan that went out on the platform.
‘So the £20 million accounted for about £108 million of overall lending going out, so very successful in terms of getting money out there to the smaller businesses that really need it. We then started conversations with the government-backed business bank, and that has resulted in £40 million again over the next couple of years for lending to small businesses.’