A viable, profitable business spots an opportunity or hits a cash-flow squeeze and goes to its bank. Then it waits. Weeks pass, sometimes months, and the answer, when it comes, may still be no. For a growing number of UK SMEs, that wait has become the real cost of relying on a traditional lender.
That is the picture set out in a recent Disrupts interview with our own Alex Fenton, a partner at FBX Capital Group. The figures behind it are striking: revenue up 54 per cent, more than £143 million arranged for UK SMEs over the year, and a client base up 57 per cent to 570 businesses. But the more useful part is why, and it turns on a distinction that is often blurred, between the price of finance and the speed of getting it.
This article draws on an interview with Alex Fenton published by Disrupts. You can read the original here: Why UK SMEs are waiting months for a bank to say no.
Two pressures on SME borrowing are usually run together: tighter bank criteria and higher costs. Alex's point is that they do different jobs. Higher rates affect the whole market, alternative lenders included, so they are not, on their own, what pushes a business away from its bank. The slow decision is.
"Traditional lenders have become more cautious, so when a business spots an opportunity or hits a cash-flow squeeze, it can be waiting months for a decision that may still be a no. That gap has widened, and demand for what we do has widened with it."
A profitable company can be turned away, or left waiting, simply because it now sits outside criteria that have grown more rigid. That, he says, is the gap alternative finance fills, "not necessarily because it is cheaper, but because it offers greater flexibility, faster decisions and funding structures better suited to the business".
The businesses moving fastest are those with lumpy, working-capital-heavy cash flow: manufacturing and construction, paying for materials and labour long before they are paid, and retail and hospitality, which feel seasonality sharply. Alongside them sit fast-growing firms and those with assets a bank struggles to value.
What links them is not a sector but a situation. "The common thread is timing," Fenton said. "These are companies for whom the cost of a missed opportunity, or a delayed decision, means more than a slightly higher headline rate."
The adviser's job, in his description, is "to translate a business fairly to the lender most likely to understand it, rather than pushing everyone through the same narrow gate and hoping". It is the difference between being assessed by the wrong lender and being understood by the right one.
The most telling part of Alex's account is where he draws the limits of his own field. Alternative finance and a bank facility, he argues, should sit alongside each other, and the right choice depends on the need. Fast, flexible funding priced for a short-term opportunity becomes expensive if used to solve a long-term one.
He is candid about when to avoid more debt altogether. "If it is a matter of timing, speed or a transaction the bank is not structured to support, alternative finance can be an effective solution. But if the underlying financial position is under strain, additional debt, from any provider, may not address the root issue." His standing advice is to seek independent guidance first, and to expect a good adviser to say when a bank, or even waiting, is the better call.
Alex resists calling this a boom. He describes it instead as a structural normalisation, with alternative finance moving from a last resort to a mainstream option considered alongside the bank from the outset, rather than after a bank has said no.
For UK SMEs, the lesson is simple. The cost of finance still matters, but for a business with an opportunity in front of it, the speed and fit of that finance often matter more. Knowing which lender will understand your business and reaching them quickly can be worth as much as the rate on the term sheet. That is why so many are no longer content to wait months for a no.