"The alternative lending market is valued at an extraordinary £6.26Bn."

Since the financial crisis of 2008 the growth funding market for the UK’s SMEs has changed dramatically. A more cautious approach from the traditional lenders has led to the rise of an alternative lending market that is now valued at an extraordinary £6.26bn* thanks to a rapid growth in the number of providers, product ranges and appetite for funding.

This huge array of options for funding growth plans, acquisitions or management buyouts is a bewildering minefield. Here we look at some of the do’s and don’ts:

1 - Do Hire a Corporate Financial Advisor

Yes, you would expect us to say this but hiring a corporate advisor does make a huge difference. Not only will they guide you through the myriad of options and information requirements, it also shows any lender or investor that you mean business. First impressions count, especially when it comes to people handing your business money.

2 - Don’t Leave it to Your FD

Too many SMEs think they can do it themselves. They can’t! There are simply too many funding options and slews of caveats out there for consideration. Being unaware of the current market leaves any business vulnerable to raising the wrong capital. See our specific blog on the topic.

3 - Don’t Take No For an Answer

Too many SMEs fail to engage with a corporate finance advisor then take a “No” from their local bank as the end of their funding search, whereas in many cases it should merely be the beginning. That first rejection can also dent a SME’s confidence to such an extent that they end of up accepting terms on a loan from the alternative market that are less than favourable, so you must maintain confidence in your business.

4 - Don’t Approach Lenders Sequentially

Approaching potential lenders one after the other simply takes too long. It can take four months or more for a lender to reach a decision, by which time cashflow pressure may force the business into accepting unattractive terms.

5 - Do Tell the Full Story

Make sure you have completed a thorough SWOT analysis of your business and that your first investment pitch is the best you can possibly do. Funders are busy people with limited resources so you will not get a second chance.

6 - Don’t Make Funders Insecure

As in any market, maximising competitive tension delivers the best results and funding is no different. Unless you seek capital through a structured funding exercise where all funders compete for your business in a coherent process that applies equally to them all, you are courting failure. If funders believe that there is an unstructured or unfair process, they will lose interest in the opportunity, potentially leaving you high and dry.

7 - Don’t be a Busy Fool

You will not have time to answer large numbers of questions from funders based on their individual bespoke requirements. A good financial advisor will be able to save you significant management time by getting ahead of the game and preparing a pack of materials incorporating and accommodating the various requirements of all the funders being approached.

* Data source used: AltFi - Alternative Lending State of the Market Report 2020

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We work with growing UK SMEs and small-cap PLCs that have funding needs in excess of £2m and regularly approaching £100m. Our clients’ needs will typically be for sophisticated finance products such as cash flow based lending or private equity investments. Our value lies in helping clients access funding that relies on confidence in future trading and cash flows. For a confidential, independent, no obligation discussion on the funding options available click the 'Let's chat' button.