Challenges facing the alternative finance lending industries

Dec 6, 2019 Blog  Alternative Finance , Corporate funding , SME funding

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Francis Wilks & Jones, a legal services firm in London recently published an interesting article on the challenges currently facing the alternative finance and asset-based lending industries specifically in the UK, but it is relevant to South Africa to.  They brought a group of industry experts together to talk about the current state of affairs for alternative financiers and asset-based lenders.  These are the key takeaways from the discussions:

Disrupt or collaborate: what is the best approach for new entrants to the finance market?

Collaborate with established players int he market.  This has worked well for fintechs, especially in the UK where they teamed up with two of the major banks.

Is regulation on the horizon for business-to-business lending?

Regulation doesn’t seem to be coming any time soon, but that may change if there is increased evidence of customers being treated unfairly or of fintechs, crowdfunders and peer-to-peer lenders to business borrowers entered into insolvency causing unfair treatment to customers and losses to their investors.

Regulation shouldn’t necessarily be feared: it has the potential to help build the finance sector by enhancing regulated lenders’ reputations and giving potential customers the trust and confidence to try out new forms of financing. However, that would also come hand-in-hand with more administration, the burden of compliance and training, and the potential inhibition of investment, growth and innovative structures.

Can traditional and alternative finance c0-exist?

Yes. There is plenty of room in the market for both. We’ve seen a range of products develop outside traditional banking and, at the same time, alternative funding has given many businesses access to debt and equity funding that they were unable to source through traditional lenders. All this has produced healthy competition between funders and investors and, consequently, access to less costly and more flexible finance arrangements. While the major banks are likely to continue dominating the finance sector, particularly in terms of providing facilities to larger corporate borrowers, the many alternative funders will operate successfully alongside the banks and will increase their share of the lending market by offering products that are both suitable for and attractive to SME borrowers.

To learn more about the alternative finance options for both SMEs and corporates, visit www.rainfin.com

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