Small Business Demand for Alternative Finance Continues to Soar
According to a new study1 by leading specialist lender, Amicus Finance Plc ("Amicus"), more than half (53%) of small business owners expect demand for alternative finance - including forms such as property finance, crowdsourcing, invoice finance and asset finance, to increase over the next two years while just 6% think it will decline.
The findings showed that small firms predict demand for alternative finance will increase by an average of 28% over the next two years. This represents an increase of 2% from last year's survey2 where 26% forecasted growth. In 2015 the combined market activity for the UK online alternative finance industry grew to £3.2 billion, representing an 84% increase compared to the £1.74 billion in 20143.
More than half (51%) of small and medium sized enterprise (SME) owners said they have used or considered using alternative finance, up from 42% in last year's survey. The most popular option, considered by 47% of respondents, was again crowdsourcing finance, including peer-to-peer lending and crowdfunding. This was followed by cashflow/invoice finance (32%), property finance such as bridging loans and commercial mortgages (29%) and asset finance (24%), which covers areas such as plant and machinery and business equipment.
On a regional basis, more than two thirds (69%) of small business owners in the North West predict a rise in demand for alternative finance over the next two years, the largest portion in the UK. Business owners in the East Midlands and West Midlands were second and third with 67% and 62% respectively. Just over half (52%) of small business owners in London predicted a rise in demand for alternative finance. SME owners in the North East were the least enthusiastic about alternative finance with 29% anticipating an increase.
The research also revealed the specific areas that SME owners are targeting for investment over the next 12 months. Two in five (39%) SME owners will look to invest in IT equipment, and nearly one five (18%) in cars, spending on average £14,496 and £5,290 respectively. 13% of SME owners said they would invest in telecoms equipment (£5,368) and 12% in plant and machinery (£7,426). One in ten (11%) plan to buy commercial vehicles, spending on average £11,163.
- 53% of small business owners expect demand for alternative finance to increase over the next two years
- Small firms predict demand for alternative finance will increase by an average of 28%
- 51% of SME business owners said they have used or considered using alternative finance, a 9% increase on 2015
- The most popular option was again crowdsourcing finance
- On a regional basis, 69% of small business owners in the North West predict a rise in demand for alternative finance, the largest portion in the UK
1 Research conducted online and by telephone by onepoll among 400 SME business owners between 9th - 14th March 2016
2 Research conducted by Consumer Intelligence among a representative sample of 422 small business owners in April 2015
3 Source: Nesta - Pushing Boundaries: The 2015 UK alternative finance industry report (February 2016)
This research shows that the business finance landscape continues to change. Demand for alternative finance is set to go from strength to strength over the coming years as mainstream lenders struggle to evolve to adequately support a thriving small business community.
Small businesses are increasingly turning to specialist lenders who have the skills to understand their specific needs. Having built a strong business base from our property lending expertise we have significantly broadened our proposition into other areas of specialist lending. Our relationship-based approach resonates well in specialist lending markets that are poorly served by mainstream lenders.John Jenkins
CEO of Amicus