What's the alternative? SMEs miss out on new funding options
New research from Aviva reveals that SMEs may be missing out on new funding options due to a lack of awareness and understanding.
According to the insurer's latest bi-annual SME Pulse, more than one third (36%) of SMEs - equal to 1.8 million UK businesses* - plan to invest in their business during the second half of 2014 but many are unaware of the range of finance options available to them, particularly when it comes to alternative finance.
The survey of 1,500 UK SMEs reveals that one third (33%) of SMEs don't understand what alternative finance is or know how to take it out. A similar proportion (29%) admit to being altogether unaware of it as a funding option.
Awareness levels are lowest among sole traders, with eight in ten admitting that they didn't understand or were unaware (84% and 80% respectively).
Just two in ten (19%) SMEs say they have considered using alternative finance as a form of funding; with twice as many (40%) saying they have not considered it as an option because they prefer to deal with their high street bank. Almost three quarters (70%) say that they perceived alternative finance as a riskier option than applying for traditional finance via their bank.
This is despite the benefits of alternative finance reported by many SMEs. Half (51%) of those who have previously applied for alternative finance say that they did so on the basis of better rates and greater flexibility than using a high street bank, and one third (31%) said it was easier to secure alternative finance than getting a loan from the bank.
Despite the increasing profile of alternative financing options such as crowdfunding and peer-to-peer lending, Aviva's research found that one quarter (25%) feel that there is not enough information available to them about the various funding options.
* Figures obtained from the Department for Business Innovation and Skills http://www.fsb.org.uk/stats
Aviva commissioned research with Redshift among 1,500 SME business owners and decision makers GB adults online in June 2014.