I have asked Conrad Ford from Funding Options for his opinions.
Even with the British economy having entered a period of sustained growth, bank loan facilities and other familiar routes to finance remain blocked to small companies of all kinds. These circumstances have demanded innovation and radical changes are reshaping the way small businesses access funding to support their progress.
At Funding Options, we match businesses with lenders that can provide financing solutions. But we’re just part of the broader picture and the entire landscape is being reimagined almost on a daily basis.
So, what might the future of funding look like? Here are some of my predictions.
More specialist lending
In years to come, businesses will be funded through facilities made available by much more specialist and niche lenders than is currently the case.
There will be much less of what we might call the ‘one-size-fits-all’ approach as taken by traditional lenders. This trend is already emerging as a response to the retreat of banks from the small business funding arena and it only looks likely to continue.
Having a greater number of more niche financial service providers will encourage innovation and spell an end to a system that sees self-employed plumbers applying for funding in precisely the same way as a haulage company with a 20-strong workforce.
From the perspective of small businesses, the processes involved in applying for and accessing finance can be painstakingly slow and unnecessarily arduous. This is despite the fact that contemporary companies of all sizes increasingly require and demand immediacy from every other service provider they deal with.
New online platforms and innovative technologies are emerging all the time to streamline and simplify the way funding deals are done. In future, the sluggish bureaucracies of traditional lenders will increasingly be viewed as archaic as access to finance is made easier through a variety of internet-enabled solutions.
It is understandable that small business bosses might lament the passing of an era in which bank managers knew the details of their financial picture and helped them find funding on the strength of long-standing personal relationships. But the reality of present-day dynamics is that banks are reluctant to lend money to small businesses and no amount of personal interactions can change that.
In my view, the prospect of a return to old-fashioned, small-town banking practices as a response to the latest small business funding needs is both impractical and undesirable. The world and the financial services sector is changing rapidly and new players and new markets will lead the way as providers of funding solutions.
Crowdfunding will find its place
Crowdfunding and peer-to-peer finance have emerged in response to demand for funding among small businesses but also due to a lack of returns for investors from bank accounts and other assets.
In future, these interesting and dynamic areas of the alternative finance market will settle down to become a specialist niche in the context of a much broader whole.
Supply and demand
Interestingly, the UK’s alternative finance markets are receiving increasing levels of support from the government and from the Bank of England, who are both desperate to see small business growth driving Britain’s economic recovery.
As so often, necessity is proving the mother of invention and I’ve no doubt that a growing number of specialist service providers will continue to broaden the scope of their services and supply small business funding options wherever they are most in demand.
Looking to find out more?
Call us on 0161 303 0610