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More alternative finance awareness necessary for SMBs

Feb 16, 2013 Sean Albert

Alternative financial services continue to become more popular among consumers and businesses across the nation, as the economic fallout hurt traditional banking companies and bolstered the use of progressive lending. Today's business owner needs to be especially savvy and thorough when evaluating which methods of financing are best for their companies.

When used properly, alternative financial products can be highly beneficial for small and mid-sized businesses (SMBs), especially as the application process is often quicker and lenders in the sector are more likely to approve loans than traditional banks. As access to credit is often an important component of a successful business, entrepreneurs need to look beyond the norm to ensure they obtain the financing they need.

Knowledge is power
Real Business recently reported that SMB owners who do not have a firm grasp on alternative financial services might be destined to fall behind the competition in the next few years. The news provider cited a study from Lloyds TSB Commercial Finance, which surveyed 2,000 entrepreneurs regarding their behaviors when trying to access credit.

The research revealed that there is a widespread misunderstanding, or lack of knowledge, regarding alternative financial services among SMB owners. According to the source, 43 percent of respondents cited an understanding of asset-based lending, which is one of the more common forms of alternative finance for businesses, while nearly three-quarters felt confident in their knowledge pertaining to standard commercial loans.

Real Business explained that only 15 percent of the respondents had used invoice finance, which is a product in which the lender disburses loans against customer receipts. 

"Access to finance is a key driver of economic recovery, and firms need to be aware of the options available to them, particularly those looking to invest and expand," Lloyd's TSB Commercial Finance managing director Donald Kerr explained, according to the news provider. "As well as government-backed schemes, there are a range of other products and services available of which many businesses are unaware."

Accessing necessary capital
There is a variety of alternative financial services available to business owners today, and many economists believe the firms that disburse this funding have helped carry the economic recovery. Though traditional avenues are beginning to gain steam once again, SMB owners should always be thorough when evaluating which forms of credit will be most beneficial for their operations and needs.

With alternative financial services, companies can ensure steady growth and solid access to funding when necessary.