More than a quarter (26%) of business leaders surveyed have had difficulties accessing finance from main banks, according to new research from Sonovate.
Also, over a third (38%) say that banks do not understand their business needs.
Further, two in five (41%) think banks’ lending policies have not kept pace with modern business needs.
This research follows a recent announcement from the Financial Conduct Authority (FCA).
The regulator warned banks to improve their treatment of small business owners after a review found ongoing instances of lenders treating small businesses unfairly when it came to areas including a sustainable payment plan, identifying and supporting vulnerable customers, and ensuring fairness.
Indeed, a third (35%) of those Sonovate surveyed said that banks provide them with no other service or support beyond lending.
Non traditional forms of finance
The research also showed that businesses which turn to non-traditional forms of finance instead are seeing tangible benefits. Over a third (37%) of businesses surveyed say that alternative lenders make it easier to access funding, and three-quarters (76%) say that invoice financing tools have greatly benefited their business, with around two-thirds (64%) citing faster transactions and business processes as key advantages.
While there is clearly a role for non-traditional forms of finance to provide improved services to businesses, Sonovate’s research exposes how few businesses make use of these types of services. Only 5 percent surveyed secured a loan or accessed invoice finance from an alternative lender in the past 12 months.
How is the cost-of-living crisis impacting this situation?
As the cost-of-living crisis continues to impact businesses across the country, being able to access finance quickly is hugely important.
This is even more true when it comes to payroll, particularly for contract worker pay – 27 percent of businesses surveyed admitted to taking more than 90 days to pay contract staff, which is not a viable operational model.
Other research shows that four in ten (44%) small business leaders expect to accelerate their finance plans in response to the prospect of further rate hikes that the Bank of England is expected to implement in the coming months.
Richard Prime, co-founder and co-CEO at Sonovate, said: “It is evident that business owners across the country are struggling to access finance through traditional means. On the whole, banks and mainstream lenders have not kept up with the needs of today’s businesses, and lack the agility, scalability and speed to provide organisations with critical funding.
“Alternative finance is perfectly positioned to plug this gap, and provide business owners with a lifeline through what is an incredibly challenging period, where funding is likely to be needed more than ever to grow the business. With the rate hike looming, now is the moment for businesses to consider all their options and make a decision that is right for the organisation in the long-term.”
The Sonovate platform delivers flexible funding and a bespoke technology platform to streamline and automate the tasks related to funding and managing contract worker placements and freelancer projects. By embedding Sonovate’s invoice finance solution, cash and resources are freed up, enabling recruiters, consultancies and labour market places to focus on growing their business in the UK and internationally.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
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