By William Fleischmann-Allen, Head of The Route - Finance
The credit crunch affected nearly everyone in the UK at some point – from politicians to finance professionals, business owners to private and public sector workers, and everyday consumers.
It cannot be denied that the financial crisis ushered in a largely unforgiving era, when small and medium-sized enterprises (SMEs) struggled to gain access to the finance and funding that they so needed to grow – especially from traditional lenders (i.e. banks). But, not everything spawned from the economic slump was bad; where unmet demand flourishes, so too does invention. That very necessity fuelled the booming alternative finance sector, which today thrives.
In the past, when SMEs have found themselves in a position where a loan has been required in order to grow, they have instinctively turned to the one place where they presume such funding to solely come from – their bank.
However, in the wake of the financial crisis, mainstream banks have simply not been able to deliver these funds like they have done previously. In fact, according to the UK Department For Business Innovation and Skills, as many as 50% of first time borrowers have been rejected finance by their bank.
This unmet demand has of course been big news since the economic collapse, but it is only relatively recently that the alternative finance solutions have started to enjoy the resounding success and media exposure that they have long deserved.
Alternative finance appears at first glance to be the new kid on the block, but - in reality - alternative finance platforms have been around for years – even before the credit crunch began raining down its devastation on the UK and global economy.
According to AltFi Funding, there are now 108 alternative finance providers in the UK – a truly remarkable figure for a sector that is indeed described as being ‘alternative’. As of June 28 2015, the cumulative total lent by P2P lenders in the UK amounted to £3,844,071,213, meaning that the sector is on track to lend the £4.4 billion by the end of the year as has previously been forecast by Nesta.
No longer just a niche industry, nor indeed the unsung hero of SME lending, the rise and rise of alternative finance is now coming into focus, and what has been happening in the sector over the past 10 years will no doubt prove to be merely the first steps in a seismic shift in the way SMEs go about accessing finance in the future.
Our proposition differs from most other platforms as we are only lending funds from a closed network of sophisticated high net worth investors. We focus on providing alternative funding for small and growing businesses and have seen our pipeline of requests for finance increase incrementally throughout 2015.
Where the banks are failing, alternative finance platforms are 'stepping up to the plate'. And, let's face it - getting fast access to finance can mean the difference between success and failure.