Advisers rejected by banks and other traditional lenders should consider the alternative lending market, a lending specialist has said.
Jamie Stewart, director at Think Business Loans, said that between November and December the sector saw a huge demand for its services, largely coming from the adviser market.
But Mr Stewart said some advisers are still reluctant to approach the alternative lending space because they have a perception it is costly and complicated.
He said: “Nearly 100 per cent of our clients have been turned down by their banks and then plopped into the world of alternative lending, not knowing where to start. But a lot of these peer-to-peer business loans are cheaper than the banks.”
Advisers approaching the company have cashflow and investment enquiries, with some businesses potentially looking to increase their pay-per-click marketing spend or wanting to expand.
Mr Stewart added: “IFAs come to us for a number of funding requirements: in fact, the whole spectrum of purposes, from aspirational stuff like management buyouts, acquisitions, and more general funding like asset finance, cashflow loans, commercial property investment and development projects, to more niche requirements around pension-led funding, as well as private equity, and investment opportunities via the alternative market.
“As there are now so many [fund] boutiques throughout the sector, many will happily take a look at a creative project, which is drawing in the interest of more and more IFAs to this market and our application.”
Advisers are also looking for funding to help develop their tech capabilities. More recently, advisers have been seeking additional capital to help clients with bitcoin needs. Due to the nature of this industry, traditional banks are relatively averse to the entire sector, which has drawn advisers to the alternative commercial finance market.
Mr Stewart said: “In the past six months, bitcoin mining has been big. IFAs are helping their clients to mine bitcoins by buying servers and hardware machines.”
The lenders on Think Business’s panel have a broad lending criteria, ranging from, the amount required versus turnover, the purpose of the funding, director and shareholder ownership, to experience and historic business performance. The panel also includes traditional and alternative lenders.
A report in December by the Cambridge Centre for Alternative Finance, found that in 2016, business funding transacted for start-ups and small and medium-sized firms grew by 50 per cent to £3.3bn, from £2.2bn in 2015.
In total, it is estimated that 33,000 firms used various debt, equity or non-investment based alternative finance channels and instruments to raise funding, which represents around 2.5 per cent of the UK’s 1.3 million employers.
Back in November 2016 the government launched a bank-referral scheme to urge banks to pass on the details of small businesses they have turned down for loans to finance platforms, who would then share the details with alternative finance providers to approach those businesses concerned.
Jane Hodges, financial planning managing director at Money Honey, said alternative finance, enterprise investment schemes and using the services of networks were among the sources of funding available to advisers.
Source: FT Adviser