According to a new study by specialist lender, Amicus Finance, more than half (53 per cent) 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 per cent think it will decline.
The findings showed that small firms predict demand for alternative finance will increase by an average of 28 per cent over the next two years. This represents an increase of 2 per cent from last year’s survey where 26 per cent forecasted growth. In 2015 the combined market activity for the UK online alternative finance industry grew to GBP3.2 billion, representing an 84 per cent increase compared to the GBP1.74 billion in 20143.
More than half (51 per cent) of small and medium sized enterprise (SME) owners said they have used or considered using alternative finance, up from 42 per cent in last year’s survey. The most popular option, considered by 47 per cent of respondents, was again crowdsourcing finance, including peer-to-peer lending and crowdfunding. This was followed by cashflow/invoice finance (32 per cent), property finance such as bridging loans and commercial mortgages (29 per cent) and asset finance (24 per cent), which covers areas such as plant and machinery and business equipment.
On a regional basis, more than two thirds (69 per cent) 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 per cent and 62 per cent respectively. Just over half (52 per cent) 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 per cent 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 per cent) SME owners will look to invest in IT equipment, and nearly one five (18 per cent) in cars, spending on average GBP14,496 and GBP5,290 respectively. 13 per cent of SME owners said they would invest in telecoms equipment (GBP5,368) and 12 per cent in plant and machinery (GBP7,426). One in ten (11 per cent) plan to buy commercial vehicles, spending on average GBP11,163.
John Jenkins, CEO of Amicus, says: “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.”
