Rising to the challenge of funding SMEs

The financial crisis of 2008 and the ensuing recession had a massive impact on the role of banking groups and finance houses within the wider economies in which they operate.

It’s no secret that these organisations became dramatically more reluctant to lend money almost overnight and the effects were felt particularly acutely by small-and-medium-sized enterprises (SMEs), which always need ready access to funding in order to survive and make any kind of progress.

Unfortunately for SMEs, even an improving economy has not been enough to encourage big banks to loosen their purse strings and to start lending to small businesses as they once did. Instead, new organisations are stepping into the void and finding new ways to provide finance options where they are needed most. 

Emerging alternatives

The issue of how SMEs can and should be financed and how they might gain access to the loans they needs is not just an issue for lenders or for small businesses themselves but also for the British government and for the Bank of England. The reason being of course that all these relevant parties realise just how important it is for an economic recovery to be driven in large part by growth among SMEs.

All of which makes the subject a matter of pressing concern for the UK as a whole but with big banks and major finance houses unable or unwilling to alter their risk-averse lending habits, alternative options have emerged out of necessity to meet growing demand for SME finance.

New challengers

Some of the larger banks in the UK have been broken up in recent years in the interest of creating stronger competition within the financial services sector as a whole. At the same time, a number new so-called challenger banks, including the likes of Tesco Bank and Virgin Money, have increasingly established themselves within the sector. 

However, even with greater competition in the banking industry, there are still significant challenges facing SMEs when it comes to finding funding and the loans they need to survive and invest for the future.

Specialist SME lenders

In the fullness of time, it could be that challenger banks have the effect of making the UK banking sector more dynamic and there will be many more options available for business looing to borrow from mainstream lenders. That is certainly the hope of the government and most SMEs across the country.

However, any major shift in that context is likely to take a long time and in the more immediate term, a new breed of specialist SME lenders, including Reparo Finance, are emerging to offer a greater array of funding options to small businesses. By providing quick decisions on funding deals, along with expert advice and asset-backed finance packages, specialist lenders like us are fast becoming key players in the SME sector.

It remains to be seen how the big banks will respond but the challenge to their dominance of the SME funding market is certainly growing from a variety of different angles and on the basis of innovative approaches to tackling the problems small companies face.