ICAS research: SME finance alternatives

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By Ian Harper, CA Magazine

9 August 2017

Ian Harper drills deeper into the ICAS “Reluctant Borrowers” research, to look at why, if SMEs are reluctant to borrow from banks, they are not more aware of the alternatives?

As previously discussed, the recent ICAS research report Reluctant borrowers? Examining the demand and supply of finance for high-growth SMEs in the UK finds high growth SMEs are reluctant to borrow from banks. But what about the alternatives?

Kevin Vendel, Senior Partnership Manager at Spotcap UK, a specialist in lending to SMEs, says: “Many SMEs are not aware of all the funding options available to them so education is key.” 

He adds: “What’s more, many intermediaries, such as accountants, trusted advisers or corporate finance advisers, are not aware of those new offerings either and it is crucial that they understand the need to educate themselves and be up to date about new players.”

According to Tim Wright, Director of crowdfunding consultancy twintangibles: “I would incorporate building awareness and understanding of the alternative finance sector and the distinctive characteristics of the crowd economy into the CPD of professional bodies as I have met very few accountants, lawyers or IFAs who really do ‘get it’ in any meaningful way. 

"The same applies to all business support services – like Business Gateway etc.”

The latest Business Barometer survey from Close Brothers Asset Finance found that 59% of UK businesses are unaware that funding can come from a large number of alternative lenders. 

Colin Swanston, MD of the transport division of Close Brothers Asset Finance, says: “The survey shows that 39% of SMEs reach out to traditional high-street banks to raise capital, in spite of continuing hesitancy from banks to lend to small businesses. 

"In 2016 business bank overdrafts decreased by 2%, and net loans from the largest UK banks fell significantly, according to the latest figures issued by the Bank of England.”

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