Cash & Liquidity ManagementLiquiditySMEs flock to alternative lenders

SMEs flock to alternative lenders

Pandemic pushes SME to alternative lending market

Tom Stenhouse, CFO at MarketFinance, says alternative lenders have played a key part in providing SMEs with access to cash.

Stenhouse says there are no inherent risks for treasurers to go to an alternative lender – but alternative lenders yet offer higher interest rates than banks, with often short-term loans.

Compared to bank loans, the alternative loan model will ease the process for businesses as most will only require latest statutory accounts, turnover and net profit, bank statements and credit facility, says Stenhouse.

“Many alternative lenders just offer an easier, quicker interface. So, part of the premise is that we can make access to finance quicker and easier for the customer than if they were to go through a bank. That’s been an attraction for many businesses during this time. Because if you’re super busy firefighting, you want to make your access to credit as quick and as simple as possible,” he says.

SMEs have been looking to access additional liquidity during the pandemic for reasons including the safeguard against supply-chain issues, engagement in M&A, or to top-up working capital.

“From the large corporates right down to SMEs, there’s been a huge wave of fundraising. And I think, particularly when it gets to smaller businesses, they tend to find it easier to raise that then when equity is very large, with often capacity to raise equity. There’s this backdrop of just generally increased demand, and in many cases, increased demand at speed,” says Stenhouse.

Stenhouse predicts there will be more cooperation between alternative lenders and challenger banks.

“I think there will be some cooperation between alternative lenders and challenger and neo banks. I can see that being an increasing trend because you’re matching expertise in terms of generating deposits with expertise in terms of generating lending.”

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