Small firms blinkered to alternative finance

A third of SMEs are unaware of funding options other than the traditional forms offered by their high street bank, a survey by Aviva has found.

Some 29% of surveyed firms said they weren't aware of 'alternative' options - such as peer-to-peer lending and crowdfunding - for financing their business plans. The figure rises to 80% among sole traders.

Other interesting findings about alternative finance:

  • just 19% of SMEs have considered an alternative funding option
  • 40% prefer to deal with their bank instead
  • 70% see alternative forms of funding as riskier than traditional bank finance
  • 51% of alternative finance applicants cited better rates and greater flexibility as important factors
  • 31% of alternative lending applicants said it was easier to secure than a bank loan.

A quarter of the firms surveyed said there wasn't enough information available to help them understand the full range of options.

Aviva's head of small business, Robert Ledger, said:

"High street banks will always be an important port of call for many SMEs - whether they are at the beginning of setting up a new business, or seeking investment to expand an existing one.

"However, with the rise of alternative finance options and increasing media focus on schemes such as crowdfunding and peer-to-peer lending, it's important for small businesses to understand that there are a variety of options open to them outside of traditional finance methods, designed to suit differing business needs."

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