It has been predicted that the alternative online business funding sector could crash through the £1 billion landmark this month, following new research that has shown a major increase of funding by 168 per cent in the past nine months.
New research from Fleximize, a new finance company that offers a choice of flexible loans and revenue-based financing to small and medium sized businesses, has estimated that the amount provided to SMEs by alternative online funders grew from around £318 million in September 2013, to £852.5 million in June 2014 – totalling in a 168 per cent rise.
During the last nine months, the company estimates that the amount of funding provided to SMEs by this sector increased by around 11.7 per cent a month and it provided around £2.2 million of new funding every day. By the end of August, Fleximize estimates that online alternative business lenders may have provided funding of over £1 billion.
Research also revealed that demand for business credit could increase, as 59 per cent of SMEs expect their companies to grow in 2014, against only 26 per cent who don’t anticipate this.
The results also stated that nearly one in four businesses claimed that they will consider alternative lenders within the next three years.
Fleximize predicts that the alternative lending SME sector will see huge growth as a result of banks continuing to be unwilling to lend, growing awareness amongst businesses of alternative lenders, and potential proposals for new legislation that will force banks to provide details of companies they have rejected for funding to alternative lenders. The government closed its consultation process on this in April.
Commenting on the surge, Max Chmyshuk, Founder and Managing Partner at Fleximize, said: “Reaching the billion pound lending benchmark is a huge milestone for alternative lenders in the SME sector. As the industry works more closely with government and banks, alternative finance will become better recognized, allowing us to reach £2 billion and beyond very quickly.
“We are hopeful that legislation encouraging banks to work with alternative finance institutions will be introduced. Our research shows 65 per cent of SMEs agree with that, with only seven per cent against it. However, only five per cent claim it would be ‘very easy’ to find an alternative lender – some 41 per cent say it would be difficult to find one.”
Max added: “Similarly, only 25 per cent of SMEs describe their knowledge and understanding of the alternative funding sector as ‘good’ or ‘excellent’, with nearly one in five (18 per cent) describing it as ‘very poor’.
“However, despite this over the next three years some 24 per cent of businesses claim that they think they will consider using an alternative lender for their organisation.”
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