Alternative finance has made a dramatic leap onto the business funding stage of late. Where people had barely heard of the industry just a few years ago, now everyone is talking about new funders breaking the bank borrowing mould. And small companies are catching on that there’s more choice available in business finance than ever before.
I’ve talked in the past about the importance of commercial finance brokers in reaching the UK’s capital-starved SMEs. These intermediaries are our valuable allies in the effort to match ambitious small firms with the right kind of growth capital for them, and they do great work in that vein. But I will make a prediction now: small business clients will increasingly ask brokers for information about alternative types of funding in the months and years ahead. Word is spreading very fast about alternative finance in the small business population, and demand is growing. And if you actively market your expert knowledge of our industry to SMEs now you could win a sizeable slice of future income.
I’ve seen the huge difference brokers already make to companies deprived of bank funding. But alternative finance offers a great opportunity for them – and their clients – on top of the more traditional financial products they already use. Our industry is evolving at an extraordinarily rapid rate. One recent estimate suggested more than one hundred alternative finance providers already exist. Of course, the current boom will slow as the market matures, but this proliferation of choice for small firms makes the role of the informed broking professional more vital than ever. Brokers have the chance to be the trusted guides of business owners navigating their way through the unfamiliar territory of alternative finance.
As said, more entrepreneurs are going to start asking questions about what we offer, and there are certain points about Boost Capital’s particular model that brokers should relay to their clients.
- Short-term borrowing is different, but not complicated. It’s designed to be repaid in weeks or months, not years. Our funding model is relatively new in the UK, but we already have evidence SMEs like the clean, quick, in-and-out manner of our lending. Simply enough, seven out of ten of our clients come back for a second or third tranche of funding.
- Alternative finance can be arranged far more quickly than conventional bank loans. We don’t need reams of paperwork to make a lending decision. All we ask for is one simple application form with evidence of a firm’s trading history, plus proof of identity, and signs of acceptable credit. Otherwise, we bypass the bureaucracy used by banks, and decide a business loan very quickly.
- Businesses that don’t fit the conventional lending model can suit alternative lenders very well. Notoriously, banks don’t like what they perceive as higher risk enterprises, such as those in the hospitality trade, retailers, beauty salons, and franchises. Brokers have a lot of experience finding such businesses access to capital, but alternative lenders are another option to offer them. We understand not all companies are the same, and our flexibility is one of our greatest strengths.
- Boost Capital repayments are based on cashflow, so business owners know what to expect. Our repayments are fixed, calculated on the business’s cashflow, and deducted from the company’s bank account on a daily or weekly basis via a BACS transaction. We aim to be as merchant-friendly as possible, and our intention is that firms always feel in control, have enough money to continue day-to-day operations, and are never presented with nasty surprises.
- Alternative finance is here to stay. We’re no flash in the pan. George Osborne talked about alternative forms of finance in his recent Budget, the major banks are reluctantly acknowledging the achievements of our disruptive industry, and, most importantly, small companies want more of what we do. More than two-thirds of small and medium businesses would consider alternative finance as a way to fund their enterprise, according to a recent study by Growth Business. In a very short time, our alternative finance industry has moved from the fringes to become increasingly mainstream.
We at Boost Capital are well aware of the learning curve the broker community is going through with the advent of alternative finance. Things have been moving incredibly quickly, and that’s why it’s our aim to assist brokers in the journey away from their traditional sources of finance. We’re working closely with the National Association of Commercial Finance Brokers (NACFB) to this end, and our Boost Capital Commercial Finance Broker Programme has already proved very popular with many broking professionals, explaining in detail our short-term borrowing model.
With so much change happening at such a fast rate, businesses are bound to feel a little overwhelmed, and they will demand more information about alternative finance from brokers. It’s a great chance for intermediaries to give their business clients a range of further funding opportunities – and to benefit themselves from the rapid growth being generated by this new market. So, add alternative finance to your portfolio of offerings, and tell your small business customers about the good work we’re doing. Both you and they could be the winners as a result.