It is no secret that financing opportunities for businesses in the UK, with a particular focus on SMEs, has steadily declined over the last three years.
Recent figures have shown that bank business loan approvals have dramatically dropped, and the appetite to offer funding solutions to small businesses has markedly declined.
SMEs account for a significant proportion of the British economy. Yet, with a current dearth in suitable financing solutions offered by traditional lenders to UK small businesses, how will they survive in 2023 and beyond?
Expert Insights from UK SME Funding Specialists
Speaking at ‘The Specialist Lenders’ Forum on Private Credit Finance’ in London, executives from companies such as Got Capital, Funding Circle and the British Business Bank shared insights on the current UK SME landscape.
“I think we all know that time is money, and especially for small businesses, if there’s uncertainty in the market” said Alex Afek, Founder and Managing Director of UK-based alternative lender to small businesses, Got Capital.
The realities of running a small business, especially in the post-COVID world, is that oftentimes there will be cash flow gaps that need plugging.
In times like these, the ability to access business funding fast is critical. As Afek warns, “gone are the days that you can go to a bank and wait for three months for an approval on a small business loan.”
Alternative Lenders Plugging SME Funding Gaps
Given the funding gap left by banks and traditional lenders, the panel agreed that alternative lenders, now more than ever, have a significant role to play in providing liquidity for small businesses in the UK.
“I think when in a downturn, I think it’s really important that there is a strong secondary and tertiary market for SME lending” said Michael Strevens, a Director at the state-owned British Business Bank.
However, some alternative lenders have already amended their funding requirements, adopting a more cautious approach to risk when it comes to small business financing.
Dipesh Mehta, Co-Head of Global Capital Markets at Funding Circle confirmed this, when he remarked that “it’s publicly known that we tighten the underwriting criteria recently”.
Others, like Got Capital, embrace a unique approach to providing small business owners with working capital.
Afek explains that there are “so many good businesses that are creditworthy” that have the funding requirements typical of SMEs.
Lending Opportunities in Times of Economic Challenges
The business environment continues to evolve at breakneck speed and, in the face of economic challenges, this can prove daunting to lenders of small businesses.
However, Afek maintains that a challenging economic landscape should not deter lenders from offering funding, as there are many opportunities to be found in times of trouble.
He cites ecommerce and construction – two industries that have historically been risky to lend to.
Despite a generally low appetite in the market to offer funding to these sectors, businesses specialising in ecommerce and construction have been able to thrive in the UK against the backdrop of COVID-19.
“If you keep your finger on the pulse for that dynamic underwriting and [are] in touch with the market, seeing when [and] where the opportunities are, I think that you can be the engine of growth for a whole industry”.
Afek continued by saying that companies now “understand that if they build a relationship with a lender, they will really benefit in the long term.”
Small businesses access unsecured, fast funding from Got Capital. As an alternative lender, Got Capital offers financing solutions specifically designed for and catered to the needs of SMEs.
