Despite a period of deregulation in the 1990s, the UK Finance Sector is still one of the most stringently monitored in the world. Initially, the Alternative Lending Market was largely self-regulated and this proved sufficient to enable the sector to grow rapidly.
The Financial Conduct Authority (FCA) now regulates the industry with similarly tough rules and standards. In the Budget of 2014, the Government stated its intention to help SMEs grow by matching them with alternative finance providers. The result was more accessible finance for small businesses that need growth investment, but are unable to meet the risk criteria demanded by prime lenders.
Choice for the Lender
There are well over 100 alternative lending platforms accessible to SMEs and with great numbers comes great competition. This is a clear win for businesses, but it does add some confusion about which option is best suited to your business needs. Here are just some of the many options available:
- Peer-to-Peer Lending
- Crowd Funding
- Pension Led Funding
- Invoice Finance
- Asset finance
- Cash Advance
The list does go on, but just by looking at the six above, it’s clear that no two funding options are the same. Some options have risk adjust rates that take into account the likelihood of your business defaulting on a loan. Others, such as cash advances, offer a higher rate from the outset, but will only recoup their investment when your business makes money.
Where Do You Start?
Alternative finance aggregator sites are a great place to start your journey, but understanding the value your finance provider brings to your enterprise is essential. The best way to obtain a thorough understanding of the pros and cons of any offer is to speak to someone with suitable experience in the sector.
Like many alternative lenders, Wellesley & Co grew rapidly during the economic downturn and was the fastest growing Peer-to-Peer lender of 2014. Without a doubt, the Alternative Finance Market is complicated, however, Wellesley offer products tailored by investor demand to ensure that their lenders are satisfied.
The risk involved with Peer-to-Peer lending is that interest payments are not guaranteed if a borrower fails to repay their loan. Investments made through the Wellesley platform are not covered by the Financial Services Compensation Scheme (FSCS). Click here for more clarity on the risks involved and for more guidance, contact the Wellesley Team today on 0800 888 6001.