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Why UK SMEs should pay attention to alternative lenders

Published on 17th July 2015 - Last update on 21st September 2018

Yesterday Rangewell was invited to attend the Centre for the Study of Financial Innovation’s round-table on alternative business funding for SMEs. Here’s what we took away from it.

There is a vibrant business lending landscape in the UK

  • UK companies account for an incredible 76% percent of alternative finance platforms in the EU, a sector that has seen a growth of 146% since 2012.
  • Peer-to-peer lending institutions form the largest segment of UK platforms, with business lending adding up to £745 million.
  • The reason for most of this growth in business lending, especially in peer-to-peer platforms, is businesses’ need for a quick turnaround.
  • Most of the applicants to peer-to-peer platforms are backable businesses that haven’t been turned down by banks, but they’re turning to alternative funding options because of their attractive lending rates and shorter wait times of two weeks on average.
  • While peer-to-peer lending is popular, it’s not the only business finance option for UK companies: SMEs are also taking advantage of the wide range of boutique and specialist lenders and other alternative funding sources like equity crowdfunding, as well as traditional bank loans from mainstream institutions.

But the P2P and alternative business lending sector still faces big challenges

  • Though some SMEs find better terms with alternative lenders, many are turned off because they’re unfamiliar with the new business lenders in the space and how “trustworthy” they are.
  • Most businesses are still unaware of the hundreds of alternative lending options available to SMEs in the UK: attendees of the round-table included representatives from accountancy firms, academic institutions, and alternative lending platforms, but no SMEs looking for funding were present.
  • Alternative lending platforms need to get better at engaging with and educating potential borrowers and their advisors to get the message out that alternative lending is a viable option for many businesses. Those present at the round-table agreed that this was the biggest problem the alternative business lending sector needed to solve.

Here’s how Rangewell is helping

  • Rangewell has been working with MBAs at Imperial College London for the last six months to independently map the whole market for business funding in the UK.
  • Rangewell’s business funding market map offers an in-depth look at the entire funding sector in the UK, including established specialist lenders that focus on specific sectors of lending such as asset finance and unsecured business lending, smaller boutique lenders offering specialized funding in particular industries such as hospitality and construction, mainstream lenders like high-street banks with a variety of funding options, and innovative new alternative lending sources including crowdfunding and invoice trading platforms.
  • Rangewell is committed to increasing awareness about all types of SME financing by educating accountants and businesses about the entire range of funding options available to them – and the quality of most of the new business lenders.
  • The free-to-use Rangewell platform provides all the information business borrowers and their advisors need on a wide variety of financing options, and we agree with the industry leaders at this round-table that spreading knowledge of all methods of funding SMEs is a top priority.

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Sarah Thornton

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