Banks’ hesitancy leads to more considering alternative funding

Leading financial controllers are moving away from traditional bank funding and pursuing other forms of capital, exclusive figures show.

Interviews with 2,500 chief financial officers and financial directors reveal that a third of companies looking to raise money are now ‘proactively’ seeking support away from standard banks.

Findings from research firm Pearlfinders, which have been provided exclusively to GrowthBusiness, show that 22 per cent of companies spoken to are turning to brokers to act as an intermediary.

Businesses are now more actively considering alternative financing options rather than the standard fundraising associated with bank loans.

Further results indicate that 14.3 per cent of those interviewed are looking at venture capital or private equity to raise finance.

The statistics come on the back of news from the Bank of England which show that the stock lending by banks to UK businesses has fallen by around £3 billion in the three months to May 2012.

Pearlfinders’ survey finds that some companies, which are looking to find a different bank, are finding the process difficult due to increasingly stringent lending criteria.

Anthony Cooper, managing director of Pearlfinders, comments, ‘Companies are reporting that they now have to work much harder to secure finance. While debt finance is still preferred, the cost of debt has increased, pushing more to consider selling equity.

‘Nearly half of all fundraising by these companies is to support growth, such as company expansion and product launches, which is great news for the economy. However, if banks continue to hold back on lending, we will potentially see a surge in venture capital and private equity deals, and possible even IPOs.’

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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Alternative finance