At the start of 2023, there were 5.5 million small businesses, constituting 99.9% of the business landscape, according to the Federation of Small Businesses.
In 2023, 150,000 small businesses have had their accounts closed by high-street banks. It is a sobering reflection on the challenges entrepreneurs face today.
The banks’ reasons for closing the accounts of small and medium-sized enterprises included concerns over financial crime and fraud, customers’ failure to provide requested information, and the banks’ risk appetite. This sheds light on the complexities businesses navigate in the financial landscape.
SMEs have raised wider concerns in recent months. Before the conclusive session of the Treasury Committee’s examination into the accessibility of financing for SMEs, the committee has released data indicating that, in the past year, 2.7% of small businesses’ accounts have been shut down by their respective banks.
In response to the challenges faced by small businesses, an increasing number are turning to mobile-friendly online neobanks, like Revolut — fintech companies that provide nontraditional banking services digitally.
Neobanks distinguish themselves by operating exclusively through mobile platforms without any physical branches, setting them apart from digital banks which are essentially the digital extension of traditional banks with physical locations. Unlike neobanks, digital banks maintain a hybrid approach.
Instead of targeting traditional banking customers, many neobanks direct their marketing efforts towards the unbanked demographic – individuals who have not utilised banking services, often due to the inability to afford high fees or reluctance stemming from complex onboarding procedures. Neobanks aim to cater to the unbanked by providing them with affordable interest rates and service fees, while also simplifying paperwork and streamlining the onboarding process to make banking more accessible.
In forging a path distinct from traditional banks, neobanks have not only revolutionised the landscape of banking services but can also become pivotal players in facilitating access to finance for small businesses. While their focus on the unbanked has been instrumental, neobanks are increasingly recognising the need for comprehensive financial solutions, including lending options, to cater to the diverse needs of their customers.
Understanding the limitations inherent in traditional banking models, neobanks are strategically entering into partnerships with alternative lenders. This collaboration allows neobanks to leverage the strengths of alternative lending platforms, which are characterised by their agility, technological prowess, and customer-centric approach. By integrating alternative lending into their digital ecosystem, neobanks extend their service offerings beyond mere transactional capabilities.
These partnerships enable neobanks to provide seamless access to funding opportunities for their customer base. Leveraging the advanced algorithms and data analytics of alternative lenders, neobanks can assess the creditworthiness of their users efficiently. This synergy not only expedites the loan approval process but also enhances the flexibility of financial products offered.
Moreover, neobanks, through their collaboration with alternative lenders, can offer a broader spectrum of loan options, addressing specific business needs with tailor-made solutions. Whether it is a short-term working capital requirement or a longer-term investment for expansion, this symbiotic relationship ensures that neobanks can meet the evolving financial demands of their clientele.
This shift allows businesses to access flexible loan options through a simplified application process, facilitating funding for expansion and growth when traditional bank financing may not be readily available.
The alternative lending sector in the UK is experiencing rapid growth, emerging as one of the most dynamic segments in finance. Recent data indicates that it is valued at £6.26 billion, while the European market has doubled, surpassing €6.6 billion.
In contrast to traditional banking, alternative finance offers several distinct advantages. The streamlined and tech-driven nature of alternative lending allows for quicker and more accessible financial solutions. Entrepreneurs benefit from simplified application processes, often requiring less paperwork and boasting faster approval times. Moreover, alternative lenders often showcase greater flexibility in their offerings, tailoring financial products to the specific needs of businesses.
The essential ingredient for every small business is capital — necessary for growth, managing cash flow, and meeting short-term expenses.
At Cubefunder, we understand the importance of flexibility and offer tailored loan products to support entrepreneurs in overcoming unexpected challenges. With term lengths of three to 12 months, no early repayment fees, and daily or weekly repayment schedules, we believe in providing entrepreneurs with the resources they need to thrive, especially during unexpected hurdles.
Cubefunder is an FCA authorised SME fintech lender offering flexible business loans ranging from £5,000 to £100,000 to limited companies in England and Wales. To apply for a business loan, the business must have a minimum monthly turnover of £4,000 and have been trading for at least three months.
One key advantage of alternative lending is the straightforward application process. In contrast to traditional banks with their extensive paperwork and lengthy approval procedures, Cubefunder provides a simplified online application that takes just 1 minute to complete.
– No late payment penalties: If a business encounters challenges, we are committed to collaborating with and supporting the business through any obstacles.
– No Early Repayment Penalties: We do not punish businesses for being successful. We do not charge any fees for settling loans earlier than expected.
– Flexible Repayment Plans: We work with businesses to create suitable repayment plans.
– No Complicated Business Plans Required: We do not ask for complicated business plans or projections. On most occasions, we just need to see the business bank statements.
– Any Business Purpose: Whether it is a cash flow buffer, tax payments, stock purchases, wages, or PAYE payments, we provide funding for all business needs.
With a track record of lending over £37 million to more than 600 businesses across England and Wales, our flexible loan products are designed to empower small businesses and help them overcome financial obstacles on their journey to success.
In summary, the rise of neobanks and alternative lending marks a transformative shift in financing, providing businesses with a more adaptable and efficient solution compared to traditional banks.
While challenges exist in the financial landscape, Cubefunder is committed to providing a transparent and human approach to lending. We believe in fostering strong relationships with our customers, understanding that the success of their business goes beyond numbers. Our dedicated team takes a personal interest in each customer, ensuring that their unique needs are not only met but exceeded. This people-centric philosophy is integral to our decision-making process, where we look beyond mere credit scores and assess each business comprehensively.
With sustained market growth, heightened competition, and ongoing technological advancements, alternative lending is poised to further solidify its status as a preferred choice for businesses seeking financing.
