SMEs seeking out alternative ways to fund growth in 2013

IN: Business news

While the majority of small businesses in the North West intend to expand operations this year, many will be looking for alternative ways to obtain credit beyond mainstream banks, according to new survey data.

Research carried out by international financial services firm, Ernst and Young, revealed 77 per cent of entrepreneurs in the North West are looking to increase the size of their workforce in 2013. Positively, this represents a significant improvement over the global figure of 54 per cent, suggesting strong business confidence within the region.

However, when questioned over the funding behind this anticipated growth, SME owners were more likely to cite personal investment than traditional bank finance as their preferred source of capital, with 35 per cent and 23 per cent mentioning each option respectively.

While the reasoning behind this trend was not discussed within the survey, the finding has raised concerns that SME confidence within the mainstream banking sector remains low. Aldermore's own research in recent years echoes this sentiment, with many small businesses expressing difficulty in gaining access to much needed credit in recent years.

As a result, the popularity of alternative funding sources has gradually grown, with numerous SMEs turning to challenger banks, crowdfunding initiatives or personal cash reserves to provide vital investment capital.

These less common options often represent a preferential route for small businesses thanks to a more considered attitude to lending decisions. Small businesses that have been turned away from traditional bank loans may therefore receive a different response from newer entrants in the banking sector, who may be more likely to consider cases on an individual basis rather than under blanket criteria.

Aldermore holds this mentality at the heart of its business, ensuring all lending decisions are made by the Bank's financial specialists, and not by automated systems. Through this commitment to a more personalised service, the Bank hope to lead a return to relationship banking, encouraging SMEs to have the confidence to apply for the finance they need to drive growth in the economy.

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