The revelation from Sage that more than half of UK SMEs with fewer than 50 employees have been rejected for a bank loan underlines the central role alternative finance has in enabling business growth.

While such figures no longer carry the shock value that they once did, they are a clear indicator of how the small business finance landscape has changed in the UK in recent years. Only recently, new data have shown how alternative finance services such as invoice finance, peer-to-peer lending and crowdfunding have increased their share of the UK SME finance market to almost 50%. It has taken just a few years for their slice of the pie to rise from a lowly 5%.

Steadfast caution from traditional lenders is the primary reason for the acceleration and the latest numbers from small business software development company Sage are another reminder of the situation. Traditional lenders have launched new SME lending funds with much fanfare, but attitudes are entrenched and the accessibility, flexibility and transparency of alternative finance services continue to be a more attractive option for small business lenders.

Interestingly, the Sage survey also found that these SMEs received no help from the state or other sources. Such a statement illustrates the need to invest in the education of small business owners about the availability of alternative finance products. As the sector develops, having established itself as a mainstream small business finance provider, an important next step is to raise awareness of its existence. The year ahead should certainly see more activity on this front, both from the private and government sectors.

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