Times Up For Traditional Finance

16th April 2018.

Thomas Hoegh speaks to the Sunday Times about the rapid growth of alternative finance providers, and how businesses are no longer seeing bank loans as the best bet.

In a recent interview with the Sunday Times, Norwegian internet investor, Thomas Hoegh, insists that the time is up for high street lenders, with many alternative options available for the average business owner. From the fastly-growing crowdfunding platforms to peer-to-peer lending and royalty financing, the road to growth is no longer hindered by tough interest rates and borrowing fees. The availability of consumer credit is at a new low, and banks are simply less enthusiastic about funding small and start-up companies. However, with rival economies at the heel, and Brexit already putting the UK at a disadvantage, encouraging innovative small and start-up businesses should be a priority.

Quantity, however, does not always ensure quality. While there are alternative finance options available to those looking to expand, many providers still demand more than they should. The widely-popular crowdfunding for example, while not demanding monetary excess, does demand clients sacrifice a percentage of their own business, imparting a slice of their ownership and independence in the process. Credit management companies, on the other hand, offer something a little different. Here at the Credit Protection Association, our debt recovery services free up cash flow and give our members the financial freedom to explore more options; all while providing the credit management expertise to improve financial standing.

There is certainly evidence that small businesses, in particular, are looking for alternative options to traditional lenders. According to the trade body UK Finance, the value of new loans to small businesses came to £5.6 billion in the final quarter of last year, down 11 percent on a year earlier.

Many companies are not as adventurous and still see a bank loan as the only option. Research published last week by the challenger bank Aldermore showed that 42 percent of medium-sized firms had missed out on opportunities because of a lack of funding. The average impact on income for the businesses affected was £110,960 over 12 months, Aldermore said.

Mr Hoegh, predictably, sees a bleak future for banks. “Some may survive by allowing for disruption internally,” he said. “Some are totally unable to do it.”

When searching for finance, there is now a variety of different platforms available. Big banks are no longer the automatic response, which considering the recent scandals concerning the institution, is a positive development. While these alternative options take advantage of new technology, they demand too much of the client in return. Crowdfunding demands a percentage of the business, while peer-to-peer lending is merely an online platform for borrowing from independent lenders. If businesses are to expand confidently, they need more than just extra cash, but a thorough deep clean of their finances.

At the Credit Protection Association, we are not just a debt recovery or credit management business, we are both. The collaboration between our debt recovery and credit management expertise allow our members to recover owed funds, while also receiving advice on how to raise their financial standing. Our team advise members on the best methods to improve a credit score, conduct credit checks on suppliers, and nurture potential. Bank loans mend financial qualms, but only in the short term. The subsequent interest rates and loan repayments merely incite anxiety and promote future financial distress further down the line.