Research has shown that many small businesses aren’t fully aware of the funding options that are available to them. This could easily result in them losing opportunities for finance which could mean they aren’t reaching their full potential for growth. Overall, most small companies rely on traditional bank lending such as overdrafts and loans, even though these are becoming more difficult to get hold of. Personal funds are also used by many SMEs. Though there are many forms of alternative finance available, businesses are not on the whole taking full advantage of the opportunities they present.
The survey was conducted on 300 businesses and attempted to understand how and why businesses have sought extra capital. Alternative finance was far less well known than more traditional forms of lending, with crowd funding the least understood of all – indeed, 69% had never heard of it. Angel investment, business cash advances and government grants also scored poorly when it came to awareness.
42% of respondents said their first move when looking for extra finance would be to talk to their bank. Few said they would shop around – just 10% said they would try all the major banks, 7% said they would search the internet for deals and just 6% would speak to a broker.
60% of the respondents had, however, sought additional funding in the last 12 months. Of these, 58% were seeking to alleviate short term cash flow problems. In these cases, it would make far more sense to consider invoice finance as a solution; one of the key problems this form of alternative finance can solve is cash flow issues.
If your business needs an extra injection of funding, then it’s worth looking outside the banks and exploring some of the alternative finance options available.