By Oliver Smith on Thursday 3 October 2019
Average cost of a short-term unsecured loan has fallen below 9.5% for most small businesses.
The total cost of short-term unsecured borrowing from alternative lenders for most credit-worthy businesses has fallen below 9.5% since March.
Funding Xchange, which tracks the lending activity of 40 specialist SME lenders, says the average rate now beats that offered by mainstream banks with representative APRs of 9.9%.
The figures come from an 18-24 month loan which would be approved by 60% of applicants.
“I am delighted to see that by bringing transparency to the SME lending market, and at no cost to the SME, competition is driving cost of funding down to lower rates for small business borrowers,” said Funding Xchange Co-Founder Katrin Herrling.
“As economic conditions are predicted to deteriorate, funding will become a lifeline for many small businesses.”
The news is due to alternative lenders racing to reduce their rates in the face of increasing competition, but remains surprising given the fears around the economy and media coverage around peer-to-peer lenders.
Additionally, Funding Xchange suspects some of the rate cuts have been due to platforms and providers at the more mature end of the market seeking to demonstrate growth and returns ahead of equity investments and IPO activity.
The figures come from Funding Xchange’s SME Lending Monitor, due to be published on 7 October.