As most readers here will know all too well, it arose when the mainstream banks stopped lending anywhere near their previous levels, as fear and uncertainty about the extent of bad debt in the system took hold.
Against this backdrop, a number of non-conventional, or ‘alternative’ finance providers sprang up to help businesses and individuals access funds that were proving more difficult to get through traditional channels.
Bold and brash
Platform Black was among this new breed of companies seeking to offer an alternative solution to the mainstream banks — and like many other alternative finance providers back then, we were bold and brash.
Some even described us as the "eBay for invoices". We rather relished the comparison – we certainly didn’t want to be just another boring financial services company.
Back then, you see, being different from everyone else, especially the high street banks, was what mattered most – in fact, many of the alternative finance providers that popped up actively promoted themselves as technology businesses first and financial services firms second.
It was all very dotcom, edgy and disruptive.
But now things are changing fast.
Alternative finance is still going strong but, in an increasing number of platforms, has grown up. Disruption has given way to order, marketing pizzazz has given way to process. Alternative finance has even, dare I say, become mainstream.
The ongoing transformation we’re witnessing within the alternative finance sector isn’t the superficial sort made by the graduating student who swaps their ripped jeans for an M&S suit and tie in order to get a ‘proper’ job.
It is a fundamental shift — in the way the industry works, the way businesses use it and the way government views it. The shift is evident in four main ways:
. Most alternative finance providers now use far more rigorous processes to vet those businesses seeking funds. They do the sort of due diligence that was once the preserve of ‘conventional’ lenders. We have become more meticulous, thorough and forensic in our decision-making and risk assessment processes. Over time, we have also developed a far deeper understanding of how due diligence and risk management are integral to a successful financial services company.
Synergies with banks
. Alternative finance providers, or the more established ones anyway, are no longer seeking to be rivals to the banks, but a complement to them. Some banks too are beginning to see alternative finance as more partner than threat, and are now referring business clients onto us if they can't offer a conventional loan themselves (the government's Business Bank was launched to formalise this very process).
. Bigger and more established firms are now turning to alternative finance, often as their first port of call. While SME minnows that the banks simply wouldn't lend to were the first to embrace alternative finance, these days bigger companies, too, see the value in alternative finance.
. The source of the funds being lent to businesses via alternative finance providers is changing. These days, institutional investors are increasingly taking a slice of the action — it’s no longer just adventurous crowdfunding investors. The fact that institutional investors have started to see the value in the returns available — and are actually putting their money on the table – shows how much the sector has matured. When institutional money hits your sector, it’s not far from being mainstream.
All in all, I think many alternative finance providers have evolved and have come to understand that the processes and procedures used by conventional financial services players can enhance their own returns, not to mention volumes of business — Platform Black is fast approaching nearly £100m of invoices traded, for example.
There’s a change in the way certain alternative finance providers are positioning themselves, too. We no longer considers ourselves to be the "eBay for invoices". In fact, nothing could be further from the truth.
Over the past 12 months we’ve brought in a new management team and are now running the business like a more conventional financial services firm — and have a team entirely dedicated to identifying and managing risk.
In summary, for many alternative finance providers being square - and a tad conservative - is actually a positive.
CHRISTOPHER SHAW co-founded Platform Black in 2012, as a way for SMEs to access finance by selling their outstanding invoices online. Previously he had more than two decades' experience as a small business owner, having co-founded the IT company PS Computer Services in 1998.