The Intermediary – February 2025 - Flipbook - Page 38
SPECIALIST FINANCE
Opinion
Transforming the
alternative finance
landscape
A
s we navigate 2025,
the alternative
finance landscape is
poised for significant
growth and
transformation. The
year will be one of opportunity and
uncertainty – two things we do not
oen see go hand in hand.
We are seeing small to mediumsized enterprises (SMEs) increasingly
seek flexible and convenient funding
options that they cannot get from
traditional lenders and banks.
Berkshire Hathaway’s ‘Business
Wire’ recently reported that the
sector is expected to hit a compound
annual growth rate of 9.2% between
2024 and 2028.
As ever more businesses
opportunistically enter the alternative
lending space, SMEs seeking this
service will need to prioritise
experience, understanding and trust.
Growth on the horizon
The UK economy is projected to
grow in 2025, with the Organisation
for Economic Cooperation and
Development (OECD) upgrading its
expectations for 2025’s GDP increase
from 1.2% to 1.7%. However, this was
the result of increased Government
spending announced in last year’s
autumn Budget. In line with this,
the OECD is also predicting higher
inflation, averaging at around 2.7%
across the year, which would be the
highest among the G7 nations.
With this, we see both opportunity
and challenges for SMEs across the
UK, and while the growth prospects
are encouraging, businesses must
be aware of – and prepare for – the
complexities that come with rising
costs and inflationary pressures.
In line with the pressures outlined
above, businesses will need to be
38
The Intermediary | February 2025
prepared for potential cashflow issues
throughout the year.
With the increases to minimum
wage and to employers’ National
Insurance (NI) contributions,
businesses will have to shell out a lot
more money every month.
For smaller businesses that might
already be struggling with the
environment of rising costs and
narrow profit margins over recent
years, we anticipate that there will be
a greater need for additional working
capital to manage the increased strain.
Looking towards the global market,
the past few years have seen a relative
return to stability aer the shock
of the Covid-19 pandemic. In 2025,
higher process and volatility could
become the new status quo.
The Trump administration
has signalled a shi away from
globalisation with the new import
tariffs, and while this is unlikely to
have a huge direct impact on British
SMEs given that the vast majority of
UK to US exports are services rather
than products, it is something to
keep in mind.
The reactions and retaliations from
affected companies could impact the
wider global economy, hindering
growth and leading to inflation – it
could also be compounded by political
uncertainty across Europe.
Advancing intelligence
Artificial intelligence (AI), as we have
seen across every industry, is set to
impact the lending sector in 2025.
With its ability to quickly process
large amounts of data, the value of
AI cannot be denied when it comes to
automating admin tasks; however,
it is important to note that this
technology can only truly be used in
addition to the people-first ethos that
is vital to the lending industry.
NICK SMITH
is group managing director
at Reward Funding
Alongside new businesses looking
to cash in on the AI goldrush,
traditional banks and lenders are
also touting AI platforms as a way to
serve the customers that they have
historically ignored.
However, SMEs seeking finance
should exercise caution with these
fully automated systems that flaen
the nuances of their businesses and
offer unfavourable terms. Unlike
lenders simply looking to capitalise
on AI, at Reward Funding, we never
outsource our decision-making or use
robots. You deal directly with humans
in the relevant team.
Two sides to the story
Overall, 2025 presents significant
challenges for SMEs, driven by
rising costs, inflation and global
uncertainties. Economic pressures,
such as higher employer contributions
and wage increases, will strain
cashflow for many small businesses.
Global volatility, including
geopolitical shis and regulatory
changes, will add further complexity.
Despite these headwinds,
opportunities for growth remain.
For the alternative lending sector,
this environment presents positive
opportunities, but we must not fall
into complacency.
By fostering trust and adapting
to changing market needs, the
alternative lending industry is wellpositioned to support SMEs through
turbulent times. ●
