Four ways to speed up access to finance for SMEs

In this guest post, Growth Street CEO Greg Carter looks at sources of alternative funding for SMEs. A must-read for any business owner seeking funding.

Small businesses are the backbone of the British economy. Indeed, the FSB has said that SMEs could make up as much as 99.9 per cent of the private sector.

SMEs are strong drivers of British economic growth and employment. However, poor cash flow – whether down to late payments from customers, supply chain pressures, or access to capital – is often cited as a stumbling block for SMEs.

Accessing funds quickly can be crucial for a business’s survival. But a recent Growth Street survey of more than 1,000 UK businesses found that 70% of respondents had never gone anywhere other than their bank for funding.

Banks are known to have restricted SMEs’ access to finance products like overdrafts in recent years. But even so, a majority of respondents to Growth Street’s survey haven’t looked elsewhere for funding.

To make matters worse, the SMEs that do manage to find loans through banks often find the terms inflexible and expensive. So how can business owners find out about other channels for funding?

Here, we list just a few ways for SMEs to go beyond the banks in seeking finance.

Greg Carter of Growth Street on alternative funding streams for SMEs
Growth Street Founder, Greg Carter

Peer-to-peer platforms

Peer-to-peer (P2P) networks operate platforms that match investors’ capital with individuals and businesses. There are a growing number of P2P lenders specialising in business finance – including Growth Street!

One of the main pulls of these platforms is that they can offer loans to borrowers more quickly than traditional banks. And the facilities on offer can be similar to the conventional bank overdraft, too: Once a facility limit has been approved, Growth Street’s GrowthLine allows businesses to draw down funds and make repayments as often as they like within their limits.

Crowdfunding

Crowdfunding allows a business to raise money from a large number of people, in order to launch products or secure funding for growth in exchange for an equity stake.

People often invest through crowdfunding by giving to businesses that they believe in on a personal level. Usually in P2P lending, borrowers and investors are anonymously connected, but crowdfunding can rely on personal connections and networks to build a groundswell of interest in a business, product or service.

Angel / seed / venture investment

Angel investors specialise in providing finance to early-stage businesses. They are commonly individuals, although there are firms which specialise in early-stage funding too. As businesses get bigger and begin to scale, institutional funding from seed or venture capital firms can help to accelerate growth.

Regional funding and grants

There is a significant number of regional funding options that can be available to SMEs. A good option could be to speak to your local Chamber of Commerce, as they often have existing connections with finance providers.

A national example of this is the British Business Bank, which is a development bank set up by the government. Its purpose is to increase the supply of credit to startups and SMEs, while also providing advice and support about running a business.

Although banks are still a vital part of the financial landscape, we continue to urge SMEs to look beyond their traditional bank. Our survey shows there is a lot for alternative finance providers still to do: SMEs shouldn’t have to struggle due to a lack of access to capital.

Greg Carter, CEO, Growth Street

(Head to our site to learn more about Growth Street and our GrowthLine product!)

Growth Street Exchange Limited is authorised and regulated by the Financial Conduct Authority (FRN 739318). Growth Street Exchange Limited is registered in England & Wales (company number 09495712) and our registered office is 5 Young Street, London W8 5EH.

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