Jun 10, 2013 Simon Williams
Since the worldwide economic troubles presented themselves in 2008, many banks in the United Kingdom put the brakes on lending to private individuals and businesses alike, fearing they would dig themselves into an even bigger hole. During this time, many people and companies went into debt. However, in the past few years, the fiscal landscape has appeared to be making a steady, if slow, comeback.
With this in mind, many industry insiders think that banks will start loosening their lending restrictions and give out funds to businesses with more frequency in 2013. While those near the subprime credit level will still likely be kept at bay, this might open up financial opportunities for a number of firms in the U.K.
That said, this presents a good amount of competition for alternative lenders. But these entities know that they will still be the favorite financier of individuals and company leaders that have greatly suffered since the economic troubles hit their peak. These lenders have to be ready to set themselves apart from the competition if these predictions come to fruition.
Traditional lending set to pick up the pace
According to The Guardian, citing information from a recent Ernst & Young ITEM Club report, bank lending is predicted to grow by 3 percent in total this year. The news source indicated that this positive outlook might be due to the recent extension on the Funding for Lending Scheme by the Treasury and Bank of England, though success has been negligible thus far.
"Behind the scenes, banking fundamentals have quietly been improving, and banks are now in a better position to be able to provide funds to the wider economy," Ernst & Young head of financial services in Europe Andy Baldwin asserted to The Guardian.
In 2014, this upward trajectory is expected to continue. The newspaper said that lending by traditional banks will soar by an additional 8.5 percent.
How should alternative lenders respond?
This might present some competition for alternative financiers, however. There are certain strategies the leaders of such companies can take to not only keep their loyal customers, but attract new clients even while banks are becoming a challenge.
Although traditional financial institutions are opening up their application requirements a bit, alternative lenders still have the upper hand because they can be even more relaxed with their qualifications. For instance, they often take things like positive histories of repayment on utilities accounts into consideration to calculate different types of credit scores, like the Payment Reporting Builds Credit ranking system.