Companies thrive on access to finance for all manner of activities – from re-equipping and re-stocking, to installing the latest information technology, from marketing campaigns to plugging temporary gaps in essential cashflow.

That is what makes access to business loans so critical to the success of any company.

So, what are your options?

Banks

• for many a long year, probably the only source of business finance for any small to medium sized company was the local high street bank;

• according to a story in the Times newspaper on the 15^th of March 2018, however, companies have taken a marked shift in attitude towards borrowing from ever-increasingly cautious banks to become “permanent non-borrowers”;

• by 2018, a half of such businesses eschew borrowing from the local bank – compared to one in three small companies six years ago;

New balance sheet lenders

• the vacuum left by the bank’s general withdrawal from the market is being filled by a number of alternative sources of finance;

• some of these, continue the banks’ role as balance sheet lenders – providing business loans from their own funds and accepting the risks of borrowers’ defaulting on loan repayments, leaving the lender to bear the losses;

• since these business loans are typically unsecured, lenders must draw on all their experience and expertise in assessing the reliability and strength of any company wishing to borrow – amounts that usually range from £5,000 up to £100,000;

• repayment terms are generally within 12 months – minimising the accumulation of interest and ensuring that the cost of credit is known from the very start of the loan period;

• one of the greatest attractions for many small and medium sized companies struggling to keep abreast of changes in a fast-moving and intensely competitive marketplace is fast access to such business loans entirely online;

• with some online business loan providers streamlined technology allows a response in principle to any online enquiry within just a minute or two;

• following your formal application, the loan may be approved and, if so, the funds are typically electronically transferred directly to your company bank account within 48 hours or so;

Peer-to-peer lenders

• whilst balance sheet lenders have followed a more conventional route in lending their own money, peer-to-peer lenders arrange business loans from the funds available from many individual depositors and investors;

• also known as investment-based crowdfunding, the lender maintains an arms distance from the risks involved in lending – serving only to match borrowers to individual willing investors and savers;

• probably the best known of these peer-to-peer lenders is Funding Circle – which also enjoys a degree of government support and endorsement;

• other peer-to-peer lenders, however, have attracted the concern of the Financial Conduct Authority (FCA);

• the FCA has been conducting an investigation into the transparency with which some peer-to-peer lending platforms have been operated and in July 2018 announced tougher new rules designed to protect the interests of investors in such schemes.

Where many high street banks have steadily backed off from lending to small and medium sized enterprises – and the latter apparently getting the message and no longer even applying for the finance they need – the vacuum has been successfully filled by the provision of business loans from alternative sources.