Thirty-nine per cent of UK businesses are worried about their futures due to funding challenges, finds Sonovate, the embedded finance and payments solution provider. In fact, in its latest research, reveals that 65 per cent of businesses now are experiencing more difficulty in accessing finance from high-street banks compared to 2022.
Big-name lenders continue to pull away from small to medium enterprises (SMEs) as interest rates continue to rise. Sonovate’s findings are supported by a recent report from the British Business Bank. The report shows that equity finance for UK SMEs declined by 11 per cent in 2022 to £16.7billion. This was driven by a downturn in market conditions in the second half of the year which has continued into 2023.
Prior to the cost-of-living crisis, funding was much easier to access, say 50 per cent of Sonovate’s respondents.
Richard Prime, co-founder and co-CEO of Sonovate, comments: “The wider economic situation across the UK is putting businesses of all sizes under immense financial pressure. Not to mention the inability to access the cash flow they need is exacerbating the issue tenfold.
“With banks increasingly unable to offer the level of support that businesses need, there is a significant opportunity for fintechs to step up and provide alternative finance options that will prove critical to keeping many organisations afloat. We’ve seen this demand first hand. To date, we have already provided over £4billion in funding. We expect the need for on-demand funding to continue to soar with reduced appetite from banks to provide finance to the UK’s innovative SMEs.”
The miscommunication between banks and SMEs
The challenge to get finance is only made harder due to a lack of clear communication between banks and SMEs. Forty-eight per cent of organisations say banks do not understand their business needs. In 2022, this number was 10 per cent lower, showing the increase in miscommunication. One suggested reason for this is a lack of awareness of modern business needs. Over half (54 per cent) of Sonovate’s respondents believe this compared to only 41 per cent in 2022.
Forty-six per cent have expressed uncertainty in knowing where to find alternative funding providers. As a result, more support is needed to signpost the options available to businesses. Indeed, around two-thirds (64 per cent) of businesses agree that there needs to be more guidance from the government about the funding options for small businesses.
Fintechs are offering a glimmer of hope though, as they look to step up and solve issues facing SMEs. As mainstream banks continue to offer complicated ways to funding, 40 per cent of respondents say fintech lenders accessible finance. Furthermore, 70 per cent have credited fintechs and their alternative funding as the reason for their company’s survival.
One example of a company stepping up to the plate is Sonovate. It provides on-demand invoice financing for companies of all sizes, ranging from startups to enterprises. Sonovate offers:
Swift credit decisions
Same-day funding
Credit insurance
Collection services
Timesheet and workflow automation
Sonovate empowers companies to concentrate on expanding their business. It ensures they are confident that processes and funds are in place to help meet payment deadlines. Since it started funding in 2014, Sonovate has lent over £4 billion to 3,300 businesses and 40,000 workers in 44 countries.
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