With the Bank of England’s recent ‘Trends in Lending’ report showing that banks are lending less to small businesses, it’s interesting to take a look into how SMEs are finding new ways to borrow the funds they need to help them start up, get through difficult periods, or expand.
According to the study, which was released on October 20th, the Funding for Lending Scheme (FLS) saw £400m less handed out to SMEs by banks in the second quarter, and the figure dropped by £3.9bn when looking at larger firms’ borrowing. The findings are a blow for those hoping that the FLS would be able to assist what is the backbone of the UK’s business economy.
Clearly, companies are either struggling to get what they are looking for from banks, or they are opting to turn elsewhere to find ways to either bring in money on a temporary basis, or make the most of what they have available. Bearing this in mind, here are three examples of how companies can achieve this without heading to the bank:
1. A peer-to-peer approach
Increasingly, companies are looking to one another to secure the funds they need. Peer-to-peer lending totalled at £300m in the first six months of this year, showing that an increased number of firms are turning to this option, either by choice or necessity.
Speaking to the Daily Telegraph recently, Funding Circle founder Samir Desai spoke of the “unprecedented level” of approaches his organisation has received. They are from firms with good credit too, suggesting that bank selectivity or complex legislation is forcing this alternative option.
2. Using your assets
Another growing form of lending is asset finance, which is basically the same principle as when people take out a loan for personal reasons and secure it against their home or car.
When businesses do it, it is more likely to be connected to inventory or machinery. Of course, there’s an element of risk here, but it is a practice that has helped tide companies over when they need money to expand.
3. Looking out of house
A third way small businesses are bringing in money without lending at all is by rethinking which services they must keep in the workplace as a necessity, and whether there are any tasks that could be outsourced.
Accounts management is one task that could be handed over to a trained outsourced team, thus freeing up time within the company to generate profit, establish growth and take greater control of your business.