berg Banking Report 2015 – A Shake-Up in the SME Finance Sector

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Posted in:Banking and Finance, Science and Tech|July 13, 2015 | Join the mailing list

Since the financial crisis of 2007 the UK has experienced various banking scandals across the years; from Libor rigging to mis-sold interest rate hedging products. Such scandals were uncovered and
detailed in our 2014 Banking Report.

In many instances, this has dented the relationship and bond of trust between customer and lender to a level beyond repair. This is especially true for SMEs who have found it increasingly difficult to access finance and investment.

In this years report we discuss the breakdown of trust, and how it has created the need for a shake-up within the lending industry – a need that is being facilitated by new models of funding. Crowdfunding and the rise of challenger banks have helped shake-up
the small business lending market, offering a welcome disruption to the norm and whole host of new opportunities.

Forgiveness is a Slow Process

It will take a significant amount of time for business owners and consumers to forgive major lenders and a lot of trust must be re-established in the meantime. The recent high profile scandals have been very prominent and the public expect the banks to change
their ways. The UKs major banks had become too dominant and have been accused of abusing their position by selling inappropriate products and services.

Alison Loveday explains in our forthcoming Banking Report that people need to realise we will never go back to the times before the 2007 financial crisis:

“Small business owners need funding to grow and must take clear advice on what is available and prepare robust business plans. We need banks lenders, regulators and business owners to speak the same language and to understand
what each party needs from the deal."

Access to Alternative Finance

Access to finance is still one of the most primary challenges facing SMEs in Britain today. It is widely believed amongst SME owners that the availability of bank loans has in no way improved since 2007. In fact, many people have argued that this state of affairs
has declined rather than improved. This has caused many business owners to postpone any investment plans and cancel any plans to invest in their own growth.

The UK market has had to change to address this issue and in response we are now seeing more and more challenger banks and alternative finance options. Fresh forms of viable alternative finance are growing in popularity by the day; they are even beginning to
attract institutional investors and many experts believe it will only be a matter of time before they hit the mainstream. Examples of alternative finance include crowdfunding, invoice trading and virtual currencies.

The current primary source of online alternative finance can be found in peer-to-peer lending. Over £1.2billion was borrowed last year and this figure looks set to rise before the end of 2015. Many financial experts believe this to be a ‘game changer’ that
can bring new competition and increased resilience to the UK economy.

berg Banking Report 2015

Alternative finance offers increased transparency and a more diverse method of lending, generating jobs and encouraging innovation at the same time. It also provides greater choice, instigates competition and potentially leads to reduced costs later down the

For more information and insight into the future of SME lending, our 2015 Banking Report launches today. You can
download the report for free here.

For more information about any of the above or for practical commercial advice on this or any other aspect of banking and financial dispute, please contact the dispute resolution team on 0161 829 2599 or email

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.)

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