Jun 10, 2013 Simon Williams
Since the Great Recession took hold a number of years ago, many consumers in the United Kingdom have had trouble making ends meet. Though the economy is picking back up, it is doing so at a remarkably slow clip, meaning that people are still struggling financially. However, finding any semblance of relief has been very difficult, as those sorts of financial downfalls can be a major burden.
After the recession took hold, many individuals were laid off or took a pay cut, meaning that numerous people defaulted on loans or had to manage a month-to-month balance on credit cards. While this might have seemed like a good solution for the short term, these actions can affect personal finances for years. Namely, credit scores often take a tumble.
As the economy is picking up, lenders are starting to relax their standards. However, because of these low rankings seen across the board, many aren't giving sums to anyone who is not a sure thing. So many others with moderate or subprime scores are looking to another source - alternative lenders.
And these companies are making it so much easier. Not only are they relying on different factors to approve or deny applications - like the Payment Reporting Builds Credit score, which takes timely payments on utilities accounts into consideration - but they're also becoming available online. This makes it easier for British consumers, no matter where they are, to have access to funds.
This is also becoming true for small and medium-sized enterprise (SME) owners. They too suffered during the tumultuous times and are having trouble securing startup money for their businesses. Alternative financiers with an online presence, however, are also providing them with help.
Starting a revolution
According to the Telegraph, SME leaders are heading to the Internet for their funding needs with increasing frequency. The news source noted that these individuals are being denied traditional financing, so they've had to adapt their strategies. Even if they are approved, the news source explained, it takes a long time, and the interest rates are usually remarkably high.
This is why the net is so attractive to many owners. The tactic is soaring largely because there's not a lot of competition. Sure, there are storefront businesses that offer alternative means of financing, and they are very popular. But when it comes to funds that are needed right away, online is being sought out more and more.
Even for alternative lenders who operate out of an office, bringing their company online might be something they should consider.
"The Internet means we are open for business 24/7, not 9 to 5," the Telegraph read. "One in two of loan applications to Funding Circle is completed outside normal working hours."
However, there is still a lot of room in the market for lenders to claim their territory online. The newspaper reported that Internet lending still isn't extremely popular, so those lenders who create a web platform now may be able to help more of the audience in need.
Making it easier for companies to find investors
This move to online has made it much simpler for business owners to connect with investors and lenders alike, according to Reuters.
"Coupled with the recession, it's the explosion of social media and the use of [the] Internet that has made it easier and cheaper to connect those who want to invest with the businesses that need finance," Nesta executive director of policy and research Stian Westlake told the news outlet.
The news source explained that the web is the perfect platform on which company administrators can find individuals who may want to donate whatever funds they can through crowdfunding initiatives, as well as alternative lenders.