Arequest on our lead-generation site from a paranormal business got me wondering why none of the Ghostbusters movies starts with anyone having to raise finance.
They all seem to just go out and buy the necessary equipment out of savings or the bequests of rich off-screen aunts. Presumably for real-world real-life paranormal investigators, it would be smart to lease the equipment, at least during that tricky first year as a startup. I’m just not aware of any lender who specialises in that field.
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On the other hand, the fact that movies gloss the important business of asset acquisition perhaps owes something to the fact that applying for finance is not a very Hollywood thing to do; if the first half-hour of Iron Man involved an entrepreneur trying to find someone to lease him a flying titanium body suit – rather than all the explosions and kidnappings of the actual film – it would never have spawned so many sequels.
This is the issue we face at the NACFB: One month of the year we have our survey results and are able to share news stories that nobody could get from any other source, while the other 11 months we are selling something that is not particularly Jerry Bruckheimer.
Last month I talked about the statistics from our annual survey; what I did not have space to investigate in much detail was the decline in uptake of alternative finance.
In the alternative finance sector, business written by NACFB brokers over the past 12 months has fallen by 14.4%, down from £848m (July 2014-June 2015) to £725m. Why might this be?
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By GlobalDataOne theory is that if you have a number of alternative funders with relatively small sums to lend, even a doubling of size will only add another one or two percent to the total value of the market, whereas if the same number of large established lenders double in size, that could make a 10% difference to the market as a whole. The level of growth is the same, but it looks bigger because the lenders started from a higher base point.
In itself that does not explain why ‘classic’ finance outperformed ‘alternative’ finance in percentage growth terms.
But remember that the smaller lenders have an influence on the larger ones.
More established funders start reacting to the innovation in alternative lending, prompted to act by the percentage growth rather than the total market size being claimed by the new kids on the block.
Suddenly these bigger names are not only servicing their long-established customers, they are also attracting a new and different breed of broker.
Therefore, it is the ‘classic’ funders which have the greatest opportunity to significantly expand in such a market.
This might be a sign that they have found a way to outcompete their supposedly fleeter rivals.
