Four in ten (40%) UK small and medium-sized businesses (SMEs) claim it is easier for them to access finance from fintech lenders rather than mainstream banks, according to new research from Sonovate, an alternative finance and payment solutions provider.

Alternative finance options increasingly offer a lifeline for UK SMEs, with seven in ten (70%) admitting they wouldn’t have survived the current cost of living crisis if it wasn’t for these types of lenders.

Two-thirds (65%) more SMEs are experiencing more difficulty in accessing finance from high-street banks than they were in 2022 as banks pull away from the market.

The latest data from UK Finance suggests a reduced appetite amongst high street banks to lend to SMEs, with gross lending dropping to a post-pandemic low of £3.7bn in Q1 2023, half of the £7.6bn two years before, and dipping slighting to £3.6bn in Q2 (latest figures available)*.

In addition to an enhanced appetite to finance SMEs, alternative lenders can offer more lower-cost products due to reduced financial overheads and more streamlined operations. These finance options can help SMEs improve cash flow, unlock investment opportunities, automate operations and, ultimately, enhance customer service.

However, with costs continuing to rise and energy bills expected to spike again this winter, more needs to be done to unlock access to alternative funding solutions with calls for the government to play an increasingly leading role. Two thirds (64%) of SMEs say there needs to be more government guidance about the funding options for small businesses.

Richard Prime, Co-Founder & Co-CEO of Sonovate comments: “Given reduced appetite amongst high-street banks, it’s no surprise that SMEs are turning to alternative finance options as they pursue growth plans and continue their post-pandemic recovery.

“Fintech lenders are successfully disrupting the incumbents due to a greater understanding of the specific funding needs of SMEs but also the ability to quickly offer on-demand funding solutions. This approach allows fintechs to offer quicker finance decisions than the established market players, empowering the UK’s innovative SMEs to concentrate on growth and generating revenue rather than seeking funding.”

Fintech lenders can also offer funding solutions to be embedded within an organisation’s platform, allowing finance to be obtained much more quickly. Invoice financing – borrowing against the value of an unpaid invoice – remains a popular finance option for SMEs with over three quarters (77%) saying these tools have improved business processes, such as cash flow management, and transactions.

Over half (51%) of SMEs say adopting fintech tools such as payroll or accounting tools would help them to become more efficient whilst 54% believe it would save time. Additionally, 47% of SMEs believe these fintech tools would provide enhanced insight into customers.

Sonovate recently launched a new platform which enhances efficiencies and streamlines processes, helping businesses of all sizes with improved integration across their suite of tech tools, timesheet automation, enhanced financial visibility and reporting. Other benefits include improved user experience, faster onboarding, and more flexible, on-demand withdrawal of funds.

Sonovate was set up as a challenger to traditional funders and provides businesses - from start-up to enterprise - with on-demand invoice financing. The tech platform delivers swift credit decisions, same-day funding, credit insurance and collection services as well as timesheet and workflow automation, empowering companies to concentrate on expanding their business, confident that processes and funds are in place to help meet payment deadlines. Since it started funding in 2014, Sonovate has lent over £4.2 billion to 3,300 businesses and 40,000 workers in 44 countries.

Sonovate recently announced a significant increase in its securitisation to £240 million from the £165 million announced last year with the strategic addition of Lloyds Bank to its group of finance providers. This deal expands Sonovate’s capabilities by enhancing the pool of the company’s lenders, bolstering its capacity to broaden its customer base and increase its funding to international companies whilst endorsing its position as a fintech industry leader.