70% of UK SMEs lean on FinTech lenders during cost of living crisis

October 30, 2023

Four in ten UK small and medium-sized businesses (SMEs) now prefer to tap into the services of FinTech lenders over mainstream banks, a marked shift in the world of business finance.

New research from Sonovate, an alternative finance and payment solutions provider, suggests that these businesses find the process of seeking finance from FinTech entities considerably more straightforward than from traditional banking institutions.

A striking 70% of SMEs have gone on record stating they would not have weathered the ongoing cost of living crisis if it weren’t for the alternative financial solutions at their disposal. This is particularly notable given the diminishing enthusiasm of high street banks to extend loans to SMEs. Data from UK Finance paints a sobering picture: lending plummeted to a post-pandemic low of £3.7bn in Q1 2023. This figure is almost half of the £7.6bn recorded two years prior.

FinTech lenders, with their nimbleness and innovative approach, are filling this void effectively. Sonovate Co-Founder & Co-CEO Richard Prime shared his insights on the shift. He said, “Given reduced appetite amongst high-street banks, it’s no surprise that SMEs are turning to alternative finance options as they pursue growth plans and continue their post-pandemic recovery.

“FinTech lenders are successfully disrupting the incumbents due to a greater understanding of the specific funding needs of SMEs but also the ability to quickly offer on-demand funding solutions. This approach allows fintechs to offer quicker finance decisions than the established market players, empowering the UK’s innovative SMEs to concentrate on growth and generating revenue rather than seeking funding.”

FinTechs aren’t just offering funding. They are introducing tools and solutions that are optimising business processes. For example, invoice financing – where businesses can borrow against the value of an unpaid invoice – has proven a popular tool, with 77% of SMEs acknowledging its role in enhancing business functions such as cash flow management.

Furthermore, more than half of the surveyed SMEs believe that adopting FinTech tools, like payroll or accounting utilities, would augment their efficiency. 54% said these tools would be a time-saver, and 47% believed they could offer enhanced insights into customer behaviour and needs.

Sonovate is at the forefront of this shift. Beyond offering on-demand invoice financing, it has recently launched a platform designed to increase efficiencies and streamline operations. This platform aims to assist businesses with improved integration of tech tools, timesheet automation, better financial visibility, and quicker onboarding and fund withdrawal processes.

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