How to choose a small business lending marketplace

Funding Options CEO Conrad Ford gives a comprehensive guide on how to choose a small business lending marketplace

The problems surrounding small businesses trying to access finance remain. In recent years we’ve seen the decline of bank lending post-credit crunch, and the shrinking or removal of business overdrafts — just two examples of the struggle of SMEs looking for funding in 2015.

One result of the decline of mainstream lending to SMEs is the emergence of small business lending marketplaces like Funding Options, harnessing the power of the internet to solve the problem of finding and accessing SME loans. But now a new challenge has appeared for small business owners trying to compare finance — how do you choose which marketplace to use?

Here’s some of the most important things every business owner should consider when deciding which business lending marketplace to use:

Do they have wide product coverage?

Traditional providers like high-street brokers have tended to focus on one particular product type, like leasing, mortgages, or factoring for example. Many of them do it brilliantly, and if you’re lucky enough to fit their criteria, they can be a great option.

On the other hand, dealing with specialists in one area of finance can feel like forcing a square peg to fit a round hole — with every question predictably answered by their chosen speciality.

Do they genuinely offer access to the dozens of finance types that now exist in the UK? With so much choice now available, it’s a real shame to shoehorn a business into a product type that doesn’t make sense for its circumstances.

For example, a lending marketplace specialising in peer-to-peer lending might suggest 'the crowd', but if a business is better suited to cash advances, that’s the solution it should have.

Do they work with a wide range of lenders?

The vast majority of lending to UK firms still comes from large institutions like challenger banks, the bigger independent lenders, and even the high street banks themselves. The question we should be asking is — does this business lending marketplace have big-name lenders I recognise?

If the answer is no, tread carefully. Established, household-name lenders are very selective about who they work with, and therefore their presence on a platform is one sign that you’re dealing with a reputable lending marketplace.

Are they regulated?

Many small business owners don’t realise that business finance is largely unregulated, and as such you don’t have the same rights or recourse that we’ve come to expect as consumers and individuals. This is a major issue that could cause significant harm to businesses, and in some unfortunate situations can actually cost the survival of the business or even the assets of the business owner.

Because some areas of business finance are regulated, responsible business finance marketplaces will typically choose to be regulated by the Financial Conduct Authority, which very importantly implies an overarching responsibility to Treat Customers Fairly.

Some internet business finance marketplaces even appear to be carrying out regulated business without the right approvals — if you have concerns, the FCA has a register you can search to find out the regulatory status of the lending marketplace you’re dealing with.

Do they have conflicts of interest?

Business finance marketplaces and brokers sometimes represent themselves as independent even if they’re largely owned by lenders — which can lead to more cases of square peg, round hole. One of the most important aspects of a good marketplace is impartiality and openness, so you need to make sure you’re not asking a barber if you need haircut.

Are they secure?

When applying for finance, you’ll be passing on sensitive details about your business and personal circumstances, particularly if you’ve been rejected by the bank. Look for online signals like security certificates and https web addresses (keep an eye out for the padlock icon next to the website address in your browser) to make sure the marketplace you’re dealing with is secure — and check online resources like Google’s Safety Center for more tips about online security.

Are they trustworthy?

Does the marketplace you’re dealing with show real, named customers — or stock photos? Are they faceless technology providers, or do they have a real customer service team you can speak to on the phone? Do they offer access to their reviews on independent sites like Trustpilot, or just display un-cited testimonials on their own website? All of these details will help you build up a picture of whether or not the small business lending marketplace you’ve chosen is trustworthy — and whether or not you’re comfortable to share your personal and business details with them.

Final thoughts

The lending market for SMEs is much more varied than ever before, and there are open, impartial marketplaces that offer the best options to small businesses, tailored to their situation, without subjective preferences or favoured feature products.

At Funding Options we’re passionate about helping businesses all over the UK access finance — one of the key ingredients for growth — and we believe that the best way to do it is by offering a transparent marketplace that is a fair representation of the whole spectrum of business finance.

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