BBB Small Business Finance Market Reports

Alternative finance market growing strongly, report finds

Small businesses are increasingly accessing finance from a variety of sources – but more work remains to raise awareness and boost confidence about the funding options available.

These are among the findings of the British Business Bank’s Small Business Finance Markets report for 2018.

It revealed several key trends, including record numbers of small businesses and start-ups in the UK and evidence that small businesses are diversifying in their choice of finance by looking beyond their main bank.

According to the report, there was strong growth in both the value of SME asset finance deals (up 12%) and peer-to-peer business lending (up 51%) in 2017.

There was also a significant increase in both the value and number of SME equity deals (up 79% and 12% respectively).

Record numbers of new businesses

At the same time, there was also strong entrepreneurial activity during the last 12 months, with the UK experiencing its highest ever population of businesses at 5.7m at the start of 2017. This included a record number of new businesses created the year before, at around 414,000.

While there are lots of new small businesses being set up, the report suggests that more now needs to be done to improve the availability of long-term patient capital to help those businesses scale and grow.
Another challenge for the next 12 months is to continue to raise awareness about the many and varied funding options available from the alternative finance market and to overcome long-held perceptions that cash support is too difficult to come by.

The report found that less than half of businesses (43%) were confident that a loan would be approved, even though 72% of applications were successful.

‘Growth in uptake of alternative lending welcome’

British Business Bank CEO Keith Morgan said: “A core objective of the British Business Bank is to encourage greater diversity of finance, so we welcome the growth in the uptake of equity finance and other alternatives to traditional lending.

“It can’t be overstated how important it is to build a more complete funding ladder for economically important high-growth businesses no matter where they are located. Scale-ups need more long-term patient capital throughout all stages of their development to be world-beating companies, and we look forward to using our new resources allocated at Autumn Budget to unlock more of this type of capital.”

Small Business Minister Andrew Griffiths said: “This report from the British Business Bank shows that although challenges remain, more small businesses are accessing finance from a wider range of sources. The British Business Bank plays a vital role in this, which is why we are working with them to establish a new £2.5bn Investment Fund to ensure small businesses can access the finance they need to succeed.”