New studies from the Competition and Markets Authority (CMA) and the World Economic Forum’s Global Agenda Council have underlined the need to raise awareness of the importance of alternative finance to SME sector growth.

According to the CMA, a lack of willingness to move current accounts is affecting small business owners’ behaviour when it comes to seeking business loans – the vast majority stick with a single provider. As a result, small businesses are missing out on considerable benefits. The CMA puts the blame firmly at the feet of the banks, criticising them for not providing enough information, and has called for the introduction of a finance comparison site for SMEs.

Given how widely comparison sites are already used, it makes sense to introduce a tool that would allow small businesses to look across the market for the best terms when it comes to accessing finance. If such a mechanism was created, it would be logical to include alternative finance and services such as invoice finance, peer-to-peer lending and crowdfunding in its scope.

Alternative finance has expanded rapidly in recent years to become a key SME finance provider, a trend that is underlined in a new white paper from the Global Agenda Council. The paper, called ‘The Future of Fintech – A Paradigm Shift in Small Business Finance’, notes that SME-to-SME lending and equity investment from fintech companies quadrupled from US$4 billion in 2013 to US$12 billion in 2014.

New data from Santander Corporate & Commercial further illustrate the need to raise awareness of SME funding options, including alternative finance. According to the bank, 13 per cent of senior decision makers at SMEs are using personal credit facilities, such as credit cards and personal loans, to finance their companies.

With alternative finance now an established provider of SME finance, it is clear that the next step is to raise awareness of the sector’s services so that small businesses can access the capital they need to thrive.

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