As we enter a New Year, there will undoubtedly be a whole host of budding entrepreneurs set to make 2016 their year for business. Add to that the high level of optimism for 2016 that small and medium-sized enterprises (SMEs) are expressing, it’s an exciting time for the small business community. With this in mind, the announcement that the Funding for Lending Scheme has been extended to January 2018, as opposed to being phased out this January, should have been welcomed with open arms.
Whilst it is great that this financing door is being left open for SMEs, we wanted to really get to grips with how well small businesses know the alternative finance sector, and whether they are aware of the funding options available to them. In a recent OnePoll study, we found that only 36% of SMEs would go to their bank for funding and would completely trust the advice and options given to them. The study also revealed that almost a quarter (23%) of SME owners would actually go it alone and try to find the best financing options for them without seeking the advice of third-party individuals.
Continued confusion, or a goldmine of opportunity?
It’s great to see that SMEs are optimistic for 2016, particularly online SMEs, with almost 49% saying that they are confident about their plans for growth this year. Funding is undeniably a vital part of business growth, and whilst it’s great that the Funding for Lending scheme has been extended, our results highlight the continued confusion around finance. Before applauding this extension, we must educate these hopeful business superstars in order to truly aid their financial needs.
There are a vast amount of alternative finance options available to businesses that have become available in recent years, and with different funding schemes and financing platforms emerging by the day, SMEs could easily become confused by this complex market. Pushed for time, and money, business owners can find it hard to get to grips with this area, and shockingly, we found that 7% of SMEs still admit to not knowing where they can get access to finance, or advice for funding.
A helping hand
However, there is help at hand; as finance platforms emerge, so have specialist online ‘robo’ advisors. Despite this, only 5% of SME owners and manager say that they know about these aggregators or comparison sites. As we settle into 2016, this simply isn’t acceptable, it is crucial that businesses are made aware of the opportunities available to them, and that they have the knowledge available to them to be able to choose the right solution for their company.
Once enlightened to the array of solutions available, it can be difficult to not become over-excited and get carried away. But it’s absolutely vital to take a careful and considered approach in order to secure the right funding for your needs. Alternative finance is a competitive industry and lenders will do their best to attract your custom. Using a platform that allows you to input your core business figures and calculate the right solution uniquely for your business, leaves you safe in the knowledge that an unbiased result will be offered to you, almost instantaneously.
You may find that peer-to-peer financing is the most suitable solution for your business, or perhaps your needs are more suited to invoice financing. Nevertheless, intermediaries are there to remove the stress and hassle from securing that all important funding. Before encouraging SMEs to apply for various government-backed funding schemes already in place, we must ensure that business owners understand all of the options available to them as a first step. With simple preparation of financial documents, a solid business plan and realistic expectations, an online advisor can help you to find the best funding solution in one smooth easy process.
By Sharon Argov, CEO and Co-Founder of Fundbird