Now a part of the mainstream, alternative lenders must find new ways to stay ahead of the curve.
It’s no secret that small businesses often face an uphill struggle to maintain a healthy cash flow. Many businesses fail in their first three years from a lack of working capital. Yet British SMEs have grown 33 percent since 2009 and are earning revenues worth £1.4 trillion a year, according to reports.
A key reason behind this marked progress in the SME sector is the increasing number of “alternative” lenders that have sprung up since the recession and which now, reportedly, lend more to SMEs than traditional banks lend on overdraft. The cuts to bank lending after 2007 paired with major advances in technology made many ‘alternative’ routes to finance far easier to discover and access. Since then, many SMEs have continued to use alternative funders as a preferred option to the banks, making the label ‘alternative’ null and void. These lenders, which come in many shapes and sizes, are now very much part of the mainstream.
From invoice finance to crowdfunding and peer to peer lending, alternative lending continues to have excellent growth potential. Unhindered by bank regulations and all the bureaucracy that comes with dealing with such huge organisations, new-style lenders can often continue to provide a solution through thick and thin.
We are now once again entering uncertain times following the EU referendum and with Brexit looming it seems likely that banks will begin to tighten their lending criteria once again, opening further opportunities for new independent lenders.
For a competitive lender, speed, flexibility and value reign supreme.
Traditional banks struggle to compete on these criteria but the rivalry from other independent lenders is tough and it is vital to stay ahead of the game.
Of foremost importance for many SMEs when choosing a lender is speed. The improvement in technology means that assessment, approvals and the lengthy admin traditionally associated with finance provision can be cut dramatically, making it faster than ever before. This in turn makes access to funding comparably pain-free to the conventional bank-loan process.
Unhindered by the regulations and processes associated with large organisations, alterative lenders can be much more flexible in their lending. They can tailor lending packages to best suit specific customers and agree lending based on more criteria than purely a credit rating.
As smaller organisations with fewer overheads, and no major debt to service, alternative can lend at great value. But alternative lenders cannot rest on their laurels. Although flourishing, alternative finance is still in its infancy – customers cannot be taken for granted. The lenders must keep thinking of ways to offer even better value for money and this requires constant innovation.
In this increasingly crowded marketplace, innovation is the differentiator. Financers must continue to think of new ways to improve their offering and customers’ experience such as easy to use apps and online portals where deals can be agreed in minutes.
Unlike banks who can, to a certain extent, rely on apathy, disinterest and a lack of knowledge to retain and even gain customers, alternative lenders need to actively attract customers. They must then offer fantastic service, with experienced staff on hand to answer queries and provide business advice, to keep customers and build a strong reputation. Lenders must continue to ask their customers what they want, and need, and improve their offering accordingly.
Because alternative lenders have the flexibility to go the extra mile, they should not only provide the speed, ease and value that is expected, but also the additional business support and a level of customer service that shines.