There have been reports on both sides of the Atlantic that some banks are pumping the brakes on providing credit to smaller businesses. While there are multiple reasons why this may be the case, a gap in lending has helped to boost alternative lending platforms that can provide a more streamlined service.
Referencing a recent report published by online lender iwoca, that claimed 83% of respondents believe high street banks are reducing the availability of funding for SMEs. At the same time, the same percentage expect an increase in the need for finance in the next 6 months.
CI received a comment on traditional banks and SME lending from Laurent Descout, founder and CEO of Neo, a Fintech that provides a cash management platform. Descout had this to say:
“Banks pulling out of the SME lending market is yet another example of SMEs being let down by banks at a time when they need it the most. There’s a number of reasons for this, ranging from regulatory to legacy issues, but it ultimately boils down to SMEs often being seen as too small to be worth the time and resources of a big bank. SMEs are the engines of the global economy accounting for 95% of the world’s businesses. Yet, this segment of the market is repeatedly overlooked and underserviced by the banks. Services and functions that were once monopolised by banks are opening up, and challengers are making significant in-roads by offering more for less. SMEs need to move away from legacy relationships which are holding them back and instead embrace new technology which can help them realise their full potential.”
