The UK’s tech start-up scene is rightly seen as a proud achievement. In London particularly, there’s a very strong scene built around Silicon Roundabout, with hundreds of new companies launching every year. Tech investment in the UK was £6.8bn last year, which is more than double that found in any other country in Europe. France, in second place, only secured £2.4bn. 
If you are a mid-sized tech company you may find it much harder than zippy new start-ups to get access to the finance you need. Once a business graduates from sexy start-up full of promise and astronomical growth models into a steady going concern, with all the everyday issues that come with that, it often becomes more difficult to attract the interest of investors.
For the mid-market, securing growth funding is a real challenge. Instead of relying on VC and the banks, companies need to broaden their options and look to alternative finance options like peer-to-peer lending (P2P) to provide the quick, dynamic funding they need. Using P2P also allows the ‘everyday’ investor to benefit by lending money direct to a vetted business, with securable assets, and receive a favourable monthly income.
Venture capital loves start-ups
Venture capital tends to gravitate towards tech companies in the early stages of development, looking for the next Uber or Whatsapp. However, for companies with a few million in turnover and a more accurately predictable growth rate, that VC interest begins to turn away in favour of shinier new companies, making it hard for established companies to achieve their goals and fund new projects.
There’s another problem: even they can’t attract VC investors, the more investment they take on, the more diluted their share in the company becomes. That’s a necessary evil, but as a mid-market company they might not want to sign away even more – they’ve probably made sacrifices along the way already, so why add more if it’s not absolutely necessary? Add the fact that VC funding often takes years to come through, and the prospects for mid-sized SMEs don’t look great.
Banks are still too nervous
At the other end of the scale, the traditional banking fraternity is equally unhelpful, but for the opposite reason. Rather than looking to back the next big sensation, the banks remain extremely nervous after the 2008 crash, and are cagey about handing out loans to mid-market companies that don’t have multi-million pound security. Loans that are approved often come with punitive terms, a lack of flexibility and small chance of an increase or extension. For companies trying to react quickly to the market, that makes it hard to remain flexible and seize new opportunities.
In short, many mid-market tech companies are ignored by VCs because they’re not edgy enough and declined by the banks because they’re not big enough. Plus, at the end of the day, the ‘big guys’ are still winning when it comes to the potential upside from the business growing, either through a share structure or monthly interest payments. These mid-sized companies are the backbone of the UK’s tech scene, the crop of successful brands which made it out of the initial scrum and build a steady income and a route to profitability. Real success for the UK tech sector means helping these companies keep going on that route, and allowing a wider audience to benefit in their success.
P2P: the way forward
The answer is that they need to widen their outlook and go beyond the usual funding routes. By going down the peer-to-peer lending route, mid-market companies can get access to funding much faster, with a far greater level of flexibility and a much lower minimum threshold for borrowing. The crowd can provide rapid, impartial funding to businesses with a clear path to profit where traditional banks are too cautious to invest, and small P2P platforms can provide a more personal, face-to-face service.
Mid-market companies may need an injection of several million or they may need money in stages, say hundreds of thousands now, and hundreds of thousands more in six months’ time in order to fund specific projects. P2P gives them the ability to borrow for either requirement. It can provide a loan for working capital and future growth but also refinancing when the company succeeds at achieving its original targets. What’s more, by selecting a P2P platform that secures its loans against recurring revenue, businesses with a steady income stream can avoid having to put up all of their assets or personal property as security.
Tech SMEs are an essential part of the UK economy, a positive influence and a source of new innovations. It’s important that they can access the funding they need in order to achieve their growth goals. With banks remaining unwilling to open their coffers in the aftermath of the financial crisis and the uncertainty of Brexit, tech SMEs need to look beyond traditional funding routes and use P2P lending to finance their vision.
The tech sector is famous for its sense of adventure and enterprise. SMEs in the space shouldn’t let themselves be discouraged by the challenge of securing funding. Instead, they should extend that ground-breaking spirit to their finances, take advantage of the opportunities that P2P offers and make their own destiny.
The ArchOver Difference:
We support UK SMEs and UK investors
The ArchOver platform has facilitated over £40m of funding for UK businesses and delivered investor returns of up to 9% p.a., with no borrower defaults, no late payments and no losses.
All investments are asset-backed
Lender security is our number one focus, and our credit analysis is one of the most thorough in the sector. All loans are secured by an all-asset charge over the borrower’s business, registered at Companies House. For additional security, all borrower revenues flow through controlled bank accounts owned by ArchOver.
No cost to invest
Unlike some other lending sites, the interest rate posted is the rate you receive – there is no cost to lend, and the rate is fixed for the duration of the loan term.
You are in control
All loan and borrowing company details are available for you to view via your Investment Dashboard. The rate, loan term and loan security are listed, and you always make the final decision on which companies you would like to invest in.
Your loan investments have been vetted and are being monitored
Every loan listed on the platform has been pre-screened and approved by our experienced in-house credit team. We monitor each month both the security provided and monthly management accounts against forecast, and we have a zero-tolerance policy for late interest payments or reporting.
You don’t have to take our word for it
I anticipate continuing to invest – “I have been an Investor for the last year. I was attracted by the market segment they're targeting and their approach to managing the potential risks. The performance to date has been fully in line with my targets and I anticipate continuing to invest. I am not a sophisticated Investor but regard myself as savvy, and in direct dealings I find the organisation is very open and most helpful. The web site is easy to navigate and my Investments performance stats are easily accessible.” – ArchOver Lender, Trustpilot
To find out more, visit www.archover.com