According to the survey – roughly one third of UK businesses (equal to about 1.8 million) are planning to invest in their business during the second half of 2014. Worryingly, however, a great many of these businesses are not at all clued up about the variety of methods that they might explore in order to raise the money. Roughly a third of SMEs don’t understand what alternative finance is, and a similar proportion have never heard of it at all.
Some other key findings from the report:
Sole traders are particularly in the dark when in comes to alternative finance, with 8 in 10 admitting to a total lack of knowledge about such funding options.
2 in 10 SMEs have considered making use of an alternative finance platform.
4 in 10 small businesses have never weighed the value of alternative funding routes because they prefer to stick with the banks.
Nearly three quarters of the respondents perceive alternative finance as a riskier option than traditional bank finance.
A quarter of the businesses surveyed felt that there simply isn’t enough information out there to elucidate what the various funding options are.
Robert Ledger, Head of Small Business and Avia, weighed in on these results:
“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.
“The first step is to understand what the finance is for. Decide whether it is to achieve growth or working capital, whether the business has security it can put down and whether the business needs investment and advice. Then look at which option best suits the business needs. If you are unsure the Government website www.greatbusiness.gov.uk is a good source of information.”
It was only a few days ago that Liberum released some telling figures about peer-to-peer lending awareness among UK adults. The investment bank found that 65% of people in the UK are totally unaware of the existence of peer-to-peer lending platforms. If it seems like there’s an especially dense flow of research designed to clarify the alternative finance knowledge gap at the moment – that’s because this issue is by far the most pressing problem for the various platforms to crack.
As Liberum pointed out in its own report, a number of impending events are likely to coalesce in order to rifle the alternative finance world to the forefront of the public imagination. Peer-to-peer ISAs and various other tax breaks, an increasing swell of institutional capital, and the recently confirmed IPO of Lending Club are chief among those events.