Maintaining momentum: alternative finance fills the gap left by high street banks

Chirag Shah - CEO, Nucleus Commercial Finance
7th August 2018
Chirag Shah Nucleus Commercial Finance
"We often debate whether the term ‘alternative’ is required anymore given the contribution that finance providers like ourselves are making to the marketplace. "

Entrepreneurs and SMEs are the backbone of our economy. In the UK, SMEs employ 16.1 million people and with a combined annual turnover of £1.9 trillion, they generate 51% of all private sector turnover in the UK. Though “small and medium” in name, their numbers are great and economic contribution crucial.

However, this integral engine to the British economy faces a crisis, with many finding themselves caught between a rock and hard place. The economy is sluggish, politics are volatile, and consumer confidence is low. Concerns around Brexit are weighing heavily on businesses and consumers minds, reducing their confidence to invest and spend. Despite this many SMEs remain hugely ambitious and are looking for finance to support their ambitions and unfortunately for many well run and successful businesses, securing funding is a challenge.

We now see banks who, through technological development and consolidation, approach lending to businesses from an increasingly formulaic perspective. The process of getting business finance now often requires many inflexible boxes to be ticked. For example, the perfect combination of several years accounting records, submission of a formal business plan, a strong personal credit score, and evidence of business collateral (equipment, inventory, or invoices) are all needed to qualify. The process has little room for flexibility or personalisation and tailoring products to match individual business needs is not always a priority. This approach means that for some businesses their model and finances aren’t truly understood and don’t tick all of the right boxes. And as a result, they don’t receive the funding they need.

Fortunately for SMEs, this is where ‘alternative’ lenders can take a different approach, enabling businesses to secure funding through tailored decision making and the matching of a product set to their needs. We often debate whether the term ‘alternative’ is required anymore given the contribution that finance providers like ourselves are making to the marketplace. As the trusted advisers to many of these businesses, your role in helping them to understand the role of alternative finance as a method of achieving their ambitions is crucial.

Although, not all alternative finance is funding for SMEs, data indicates that nearly three-quarters of it ends up with smaller enterprises. According to the Cambridge Centre for Alternative Finance, 72% of UK alternative finance market volume - some £3.3bn - was raised for UK start-ups and SMEs in 2016. This already large number is steadily rising as alternative finance providers step in to fill the void left by more traditional lenders. 

At Nucleus, we started the business to provide a true alternative to a failing model that was neglecting the financial needs of businesses. We believe that looking beyond the balance sheet enables us to see the true story and potential of a business - and then find the finance that fits. Every business is unique, has unique challenges and competitive advantages to consider and we are proud to provide the financial backbone for our clients, leaving them able to further their own success stories.

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