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Britain’s small businesses bank on alternative finance for future growth

2nd Nov 17 11:52 am

Here’s why

British small business owners have expressed concern that political and economic uncertainty could make it more difficult to secure funding to support growth in the coming year, claims a new study commissioned by Worldpay.

According to a survey of 1,000 small business owners, more than half say they are planning for growth in 2018. But as many as 52 per cent of start-ups and early stage business owners admit they are concerned that traditional routes to finance, including bank loans, may not be available at the same levels in the coming year. Nearly a third (30 per cent) say they have already encountered difficulties securing funding through these channels.

Rather than put their ambitions on hold however, Worldpay found small business owners are increasingly looking at alternative financing options, such as peer-to-peer lending, crowdfunding and business cash advances to support growth.

Forty per cent of younger business owners say the growth of alternative finance options has made them less reliant on banks for funding, with the research revealing alternative funding options are almost on a par with traditional bank lending in terms of popularity among startups and younger business owners.

While 21 per cent of business owners aged 44 or under say they’re still most likely to apply for a bank loan when looking for funding, nearly as many respondents (17 per cent) say they’re more likely to look at crowd-funding, while 11 per cent prefer peer-to-peer lending, and six per cent say they favour business cash advance.

James Frost, CMO Worldpay UK said: “Small businesses are the engine room of the British economy, so it’s very encouraging to see that so many of the UK’s entrepreneurs and independents are planning for growth. A lot of business owners will remember the credit crunch of 2008 and the difficulties they faced during that period. We’ve come a long way since then however, and today small business owners have an incredible number of options available to them in order to support growth.”

Worldpay found that while younger small businesses owners are comfortable to shop around for finance outside of traditional channels, older business owners were far less likely to consider alternative financing options over a traditional bank loan, leaving them potentially vulnerable should lending levels drop. 

Frost continued: “It’s important that small businesses familiarise themselves with the options available to them, so they can pick the funding route that best suits their circumstances. Banks do an incredible job in supporting thousands of small businesses every year, but the traditional bank loan may not be right for everyone.”

Services like Worldpay Business Finance, which allow businesses to access an unsecured cash advance based on their future credit and debit card sales, are proving increasingly popular among the one in ten business owners who say having to make fixed monthly payments has put them off traditional lending.  Worldpay Business Finance enables businesses to pay off a fixed amount based on a pre-agreed percentage of their card transactions. So if they have a good month, they pay off a little more, and if they have a slower month they pay off a little less.

Pub owner Simone Taylor is one small business owner who found that a cash advance was the best way for her to continue to grow her business, The Golden Lion gastropub in Keswick. Hit by severe flooding in December 2016, Simone sought additional funding to bridge the gaps in her cashflow, and fuel business growth by expanding her food menu.

“When I found Worldpay Business Finance, everything changed. The best thing about it is that it comes with the beauty of only paying back as we earn. It’s finally enabled me to focus on building the business, rather than worrying about the money.”

Worldpay Business Finance is available to eligible Worldpay customers.  Since its launch in 2015, Worldpay Business Finance has tripled the amount of funding to UK SMEs in 2017 and 79 per cent of customers like it so much they renew.


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