How access to finance has changed for local businesses

The traditional trip to the local bank or building society has long been a part of many businesses’ journeys towards success. Securing the funding needed to pay for a first office, new company car or even a market stall started with a request for a loan, but is this changing? Bank branches are beginning to disappear from the streets of many Shropshire towns.

A report last month revealed that more than 30 bank branches across the county and surrounding areas have closed in the last five years. Whilst Shrewsbury has quite a few branches still open in the town centre, those businesses based in the suburbs and nearby villages are left to look elsewhere to get even the most basic banking services.

To try and secure a loan or grant, going through the old-fashioned route of approaching a bank is not the only one available. There is a growing shift towards applying for funding online, an avenue which is proving to be a lifeline for many remote would-be entrepreneurs.

Pitching to the public

Avoiding banks altogether is more doable than ever for many new businesses searching for finance. One such way is through crowdfunding, where entrepreneurs can pitch their business idea to the public. To make money through crowdfunding, interested investors can put their money into the business in exchange for a share of any profits or a free product.

Many businesses have managed to successfully gain millions through crowdfunding. A prime example are Scottish brewers BrewDog, who managed to gain £10m in funding thanks to a crowdfunding campaign. However, this isn’t the only way in which new companies can get the money needed to get off the ground.

Alternative sources

Online finance has been fuelled by the growth of ‘alternative finance’. This is a catch-all term for different forms of finance such as peer-to-peer lending and emergency loans. For anyone turned down by a bank or building society, regardless of whether it’s in-branch, by phone or online, alternative finance is seen as an accessible alternative.

Areas of alternative finance such as confidential invoice discounting are part of a wider trend of accessing funds online. Through a variety of means, companies looking to fund growth or investments in new technology are able to get the money far more quickly than they would the old-fashioned way. In some instances, the money could be in their accounts in just minutes.

As loans, grants or investments, this form of finance is proving useful for many businesses in the Shrewsbury area. Those who have been turned down by banks for whatever reason now have a lifeline.

Although banks account for around four-fifths of SME lending, there are still some companies falling through the net. In turning to alternative finance, they know that it doesn’t necessarily mean ‘game over’.