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Business Borrowers Look To Alternative Lenders In Challenging Times

Business Borrowers Look To Alternative Lenders In Challenging Times

24 October 2022

Working capital funding plays a vital role in an unpredictable economic environment, helping businesses overcome short-term difficulties and maintain growth. At a time when traditional funding is becoming more challenging to access, receivables finance providers are likely to see increasing opportunities to deploy their financing models.

According to EQ Riskfactor's 2022 Global Business Borrower Report, about two-thirds of businesses in the US, UK, Germany, France and the Netherlands say they would approach a bank first when looking for working capital funding. However, almost three-quarters (73%) would consider using an alternative lender. Around eight out of ten businesses in the UK, Germany and the US say they would consider an alternative lender. A combination of the difficult economic environment, tightening credit conditions, and a propensity to think outside the box regarding finance provision seems likely to lead to a significant increase in receivables finance funding and asset-based lending.  

The report's findings also reveal the three most important factors influencing the choice of a working capital provider: rates or price (22%) was closely followed by service quality (18%) and speed of funding (17%). Clearly, even if banks are still often the first port of call, many businesses would consider other lenders with a more compelling overall proposition. Just 13% of businesses say they would always go for the lowest rate, so lenders have plenty of scope to differentiate their offers based on other factors such as relationships and speed of process. 

Another striking feature of the report is that many businesses said they would be prepared to share financial data directly from their accounting software in return for a better funding offer. Almost eight out of ten business borrowers would share financial data with a lender in exchange for a better price, higher levels of funding, a faster decision, or access to a wider selection of working capital solutions. Such an approach has not been a significant feature of funding markets historically but is a growth area to watch as technology becomes a more significant enabler in accessing finance.  

Our research underlines the importance of all lenders using best-in-class technologies to manage risk and increase the efficiency of back office and customer-facing processes to deliver the appropriately priced, high-quality services that business borrowers now expect. 

Any lender failing to refine and recalibrate their working capital propositions will likely lose market share. But those that succeed in doing so will be ideally positioned to keep serving borrowers effectively, benefitting businesses and lenders alike – and ultimately helping to boost economic growth.

2022 Global Business Borrower Report

For more borrower insights and to find out about our recommendations for working capital providers, read our full Global Business Borrower Report.

Download the report here

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