The U.K. is reportedly the largest alternative financing market on the planet, and federal policymakers have taken up the topic of alternative lending to assure that small businesses across the region have access to working capital necessary to grow the economy.
But new research from UK Bond Network suggests that there is a wide knowledge gap within the SME community, and that as much of half of these small businesses are unaware of alternative financing options.
According to Wednesday reports (March 25), 50 percent of U.K. SMEs agree that alternative finance has opened new doors to funding. The majority of business surveyed (68 percent) said that they would consider turning to an alternative lender to access working capital; for corporations with annual revenue greater than $1.64 million, that figure spikes to 94 percent.
These figures could be good news for the already thriving alternative finance market in the U.K., but the study also reveals that the remaining half of U.K. SMEs are not sufficiently knowledgeable about their alternative financing options – a figure that suggests alternative financers still have a gap to fill in the industry.
According to UK Bond Network CEO and founder Christopher Maule, that knowledge gap is hampering the adoption of these new financing options. “Looking at the survey results, there’s a clear correlation between understanding alternative finance and willingness to use it,” he said. “With this being the case, improving knowledge of alternative finance will be critical for increasing its uptake. While demonstrating its benefits to business owners themselves will be important, increasing understanding among accountants and professional advisors – the bodies SMEs trust – will be critical if the sector is to reach its full potential to support SME growth."
The UK Treasury focused largely on alternative and peer-to-peer financing options in a recent report examining the ability for SMEs to access working capital in today’s market, and the European Commission is presently exploring legislation that would aim to facilitate cross-border crowdfunding to raise SME capital.
The focus of federal officials on these issues is a reflection of the strong alternative finance market in the U.K., despite this wide knowledge gap. The peer-to-business finance market, reports said, surpassed $1 billion in 2014. “Alternative finance is moving into the mainstream,” Maule added.