Alternative lender Close Brothers issued a report in which it identified that 33% of SMEs have never changed to a new lender. The reasons included a lack of time, being unsure of options and fear of being penalised by their current provider. Of those that did move to a new lender within the last 10 years, almost a third moved to an ‘alternative’ (i.e. ‘non-bank’) lender.
Whilst many borrowers will not be familiar with the alternative finance market, the market is growing and offers products that compete with traditional sources, as well as some innovative solutions not available through the recognised banks.
You may not know that for many years we have been building contacts in the alternative lending market. Whilst we specialise in dealing with the banks (because we all previously worked in commercial banking) we do also have a network of independent lenders that we use when the banks cannot or will not lend. At the last count, our network comprised over 270 different lending institutions.
Benefits of the alternative finance market
As well as offering products that are not available through the banks, many alternative lenders have products that can sit alongside a borrower’s existing arrangements without disturbing them. Other benefits you might be interested to know are:
- Some do not require the borrower to provide any security
- Competition in some areas is very keen (for example invoice finance) so borrowers can actually save money by moving to a non-bank lender
- Often, existing borrowing lines can remain in place, avoiding legal fees and ‘switching’ costs
- Borrowers can then spread their risk across more than one lender – they no longer have to risk ‘riding a one horse race’
- The terms attached to them can often be more flexible and allow a business more room to ‘breathe’
- They can be much quicker to arrange
- Some lenders will fund against assets that the banks cannot look at
You might say that we provide a ‘one-stop’ service for businesses seeking finance, because we can work comfortably in either market; in fact, we frequently approach alternative lenders and banks for the same transaction. This gives our clients better market coverage, allows them to compare traditional and alternative financing solutions at the same time, and speeds the process up.