Advisers need to acknow-ledge more the alternative lending space and encourage small to medium-sized business to look for alternative lending products and services which are more suited to their individual needs, Tony Pegg has said.
The chief executive of United Kapital said that small business owners have had a tough time since the financial crash and, despite the government putting banks under pressure to provide more capital to SMEs, the “root of the situation had not been addressed.
He added that innovative alternative lenders and products have to some extent fill the void, but that this is still a “miniscule” amount compared to the funding required by SMEs.
According to the Bank of England’s Trends in Lending report, the rate of growth in lending to UK businesses remained negative in the three months to February.
The report also found that lending to both small and medium-sized enterprises and to large businesses contracted over this period.
Mr Pegg said: “Alternative finance in general in the UK is thought to have grown by 91 per cent in recent years and is expected to be worth more than £1.6 billion by the end of year.
“However, experts argue the sector could be far bigger if small firms were directed towards them.”
ADVISER VIEW
Robin Sainty, chartered financial planner of Norwich-based Nurture Financial Planning, said: “The banks have made borrowing increasingly difficult for SMEs as they require more and more security/higher interest, which has led to a surge in the peer-to-peer lending sector to try to fill the gap. We see alternative lending becoming increasingly established in the SME sector. Our first-hand experience of alternative sources of lending is fairly limited, but the United Kapital proposition demonstrates that the alternative lending market has a better understanding of the needs and problems of SMEs than the banks. However, as it is such a relatively new market, financial advisers would need to be careful over conducting due diligence checks before recommending lenders.”
