84% of UK retail SMEs have never heard of revenue-based financing, according to a study published this month by Liberis.
Liberis, the leading integrated finance platform, commissioned YouGov to conduct research on SME attitudes towards new forms of finance.
Liberis found that retail SMEs still rely heavily on traditional banking methods and also largely lack awareness of new banking solutions that could help them.
Liberis’ groundbreaking research revealed that
- 84% of retail SMEs have never heard of revenue-based financing
- Only 5% of retail SMEs are aware of and currently use open banking
This lack of awareness amongst SMEs means that they stand in the way of their own survival and growth as SMEs struggle to get finance and the UK heads towards a recession.
New forms of financing, such as income-based financing, give SMEs the possibility of accessing financing that they would otherwise be denied.
For example, revenue-based financing offers financing based on the overall financial performance of each business, with payments made as a percentage of revenue. Payments for financing are made as a proportion of revenue so that companies are not penalized for a difficult financial period and pushed into the red.
The lack of knowledge and use of new forms of financing among SMEs represents a great opportunity for financial providers to educate the market.
Financial providers that take the lead in educating SMEs in retail and offering products for their unique needs can drive SME growth and increase their own clientele.
Rob Straathof, CEO of Liberis, commented: “The retail industry is not realizing its full potential because it has not yet embraced new forms of financing.
“As the UK heads towards a weaker economy, SMEs need to be aware of alternative finance providers and new forms of finance that can better meet their needs than traditional banking.
“Financial providers have an opportunity to educate SMEs at this critical time and empower them to make the best financial decisions, as well as increase their own market share within retail.”
The Liberis research also highlighted the challenges retail SMEs face when applying for finance.
The investigation revealed that:
- Among retail SMEs applying for financing, the biggest pain points are cost and required documentation
- 19% of retail SMEs applying for financing identify cost as a pain point; the same percentage identifies the required documentation as a problem
- Among all SMEs in the retail sector, cost is the most important factor they take into account when seeking financing
- Half (50%) of retail SMEs consider cost when seeking financing
- 41% of retail SMEs consider supplier reliability when seeking financing
These findings show that there is an opportunity for newer lenders to make the application process easier for retail SMEs.
Liberis research highlights the opportunity within retail to increase the use of new forms of financing and to facilitate financing requests. SMEs in the sector can benefit greatly from new financial solutions, but their current lack of awareness is holding them back. Financial providers that want to increase their presence in these spaces should invest in market education: show SMEs that there is more to financing than traditional banking.
Liberis creates flexible, integrated financial solutions that empower businesses and deliver positive impact. Founded in 2007, Liberis is a leading global integrated finance platform with a mission to provide small businesses with accessible and responsible financing, based on the belief that financing should always be a positive force for small businesses. Liberis provides partners with the technology platform and financial solutions to offer hyper-personalized and affordable financing, enabling their small business clients to increase their income. With more than 14 global strategic partners and direct reach to more than 1 million small businesses, Liberis has provided nearly $1 billion in financing in more than 45,000 transactions, creating and saving more than 100,000 jobs. Liberis revenue-based financing is a form of accounts receivable financing, not a loan. Advance amounts are subject to status and our underwriting process before any offer can be made.
Learn more at: liberis.com