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Alternative finance for startups and small business

  1. Alex Moys

    Alex Moys UKBF Newcomer Free Member

    Posts: 0 Likes: 0
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    In association with The Business Show

    The SME alternative finance (AltFi) landscape is constantly changing and expanding. Now alternative methods to raising capital are a realistic option for business owners seeking the finances required to launch their startup or expand their business.

    Historically a startup’s first port of call would be to visit the bank and secure a loan. But with bank lending contracting rapidly, new alternative methods of securing funding have begun to become very popular with startups.

    You can learn more about alternative finance and find an amazing range of information, education, and opportunities at The Business Show, which is taking place at ExCeL London on the 17 and 18 May 2017. Claim your free ticket by visiting www.greatbritishbusinessshow.co.uk.

    A recent joint report from the University of Cambridge’s Centre for Alternative Finance and Nesta, which studied 94 crowdfunding and P2P lending platforms, showed just how far AltFi has come:

    • The AltFi market grew by 84% to £3.2 billion in 2015
    • Institutional investors were behind 32% of loans in P2P consumer lending and 26% of P2P business lending
    • AltFi’s market share in SME lending and investment is rapidly increasing. Alternative finance business lending is 12% of the market for lending to the UK’s small businesses. Equity crowdfunding is 15.6% of total UK seed and venture-stage equity investment
    • 2015’s fastest growing models were donation-based, which saw a 500% growth since 2014 to £12 million, and equity-based crowdfunding, which rose by 295% since 2014 to £332 million

    So what benefits do these alternative finance sources bring to your business? Here are three key advantages:

    1. It gives you greater choice

    SMEs are spoilt for choice with the large array of alternative finance options available. Nesta and the Cambridge Centre for Alternative Finance’s report found that nearly 20,000 SMEs raised alternative finance through online platforms in 2015, with the borrowing total almost reaching £2.2 billion.

    They also estimated the figure is likely to pass £5 billion this year. As the market expands, so too will the lending options.

    Crowdfunding is a great option for startups and early stage businesses who have a great idea that’s yet to get off the ground, then go for crowdfunding. But if your business is well established and you’re looking for a business loan, then you’d be better suited to one of the peer-to-peer lending platforms.

    The difference between this and crowdfunding is that you needn’t surrender any equity, but rather pay interest on the money you borrow.

    2. It gives you quick and flexible access to finance

    Alternative lenders often offer a simpler and quicker lending process than traditional lenders like banks. There’s also less bureaucracy when going through alternative sources, ensuring a considerably smoother and more efficient process.

    A recent study by Amicus, a specialist financial services group, into alternative finance, found that many respondents were increasingly turning away from traditional lenders. Amongst many reasons for this were “concerns over slowness around decision-making from mainstream lenders, inflexible lending, and insufficient knowledge and experience as reasons for underperformance”.

    Peer-to-peer lending is a particularly fast and flexible way of receiving a cash injection into your business. But it isn’t the Wild West, either. Investors will typically want to see a comprehensive business plan and financial forecasts when you make an application for security, especially for seed stage businesses.

    Crowdcube are the world's first equity crowdfunding platform, backed by more than 570 private investors. They provide a fantastic resource for smaller business owners and startups to take full advantage of. Equally a great peer-to-peer platform for SME’s to consider is Funding Circle, the world’s leading marketplace having invested more than £2.5bn to 25,000 businesses.

    3. It gives you a specialist SME service

    Alternative finance providers such as Crowdcube, Funding Circle and angel investors all understand the wants and needs of SMEs.

    They’re well versed in the challenges faced by business owners, and will have specialist knowledge in a variety of sectors, ensuring that you couldn’t be in safer hands when it comes to finding the finance that’s critical to the launch of your business project.

    All of these players will be present at this year’s The Business Show.From exhibitors ‘Startup Loans’ and ‘Funding Circle’, to features like ‘Angels Den’ and’ Midas Touch’ where you can pitch for investment from angel investors. The show will also feature keynote’s from leading alternative finance figures like James Meekings, UK Managing Director and co-founder of Funding Circle, and Matt Cooper, the Co-founder and CCO of Crowdcube.

    Join 25,000 SME’s and entrepreneurs and learn more about alternative finance at The Business Show taking place at ExCeL London on the 17 and 18 of May 2017. Visit www.greatbritishbusinessshow.co.uk to register for your free ticket today.