Fintech lenders provide lifeline to SMEs suffering from higher costs
Four in ten small- and medium-sized enterprises (SMEs) prefer fintech lenders over mainstream banks, according to new research from embedded finance provider Sonovate.
Two thirds of SMEs have reported that it is more difficult to secure funding from banks than last year, with 70 per cent saying they wouldn’t have survived the cost of living crisis without alternative financing options.
Gross lending by high street banks to SMEs has dropped to £3.7bn in the first quarter of 2023, from £7.6bn in 2021, according to figures from UK Finance.
Read more: More businesses struggling to access finance from banks
But although alternative financing can help SMEs improve cash flow and enhance customer service, many believe that there should be more government guidance about the funding options available.
“Given reduced appetite amongst high-street banks, it’s no surprise that SMEs are turning to alternative finance options as they pursue growth plans and continue their post-pandemic recovery,” said Richard Prime, co-founder and co-chief executive of Sonovate.
“Fintech lenders are successfully disrupting the incumbents due to a greater understanding of the specific funding needs of SMEs but also the ability to quickly offer on-demand funding solutions. This approach allows fintechs to offer quicker finance decisions than the established market players, empowering the UK’s innovative SMEs to concentrate on growth and generating revenue rather than seeking funding.”
Read more: SME funding crisis: 40pc of SMEs report cashflow problems
Read more: SMEs look to fintechs to reduce costs