Recently announced losses and settlements by major banks will raise SMEs' awareness of alternative lenders, according to business e-lender Everline...

Last week, Deutsche Bank announced a loss of around £4.3bn and said it would be axing 15,000 jobs.

The Royal Bank of Scotland (RBS) and Barclays both announced profits, but were forced to set aside £129m and £560m respectively for claims and settlements.

Russell Gould, Chief Operating Officer at Everline, believes that alternative lenders can now compete alongside mainstream banks, particularly when it comes to SME lending.

He pointed out that high street banks traditionally consider six points when reviewing a loan - origination, underwriting, loan review, operations, monitoring and collections, and compliance – and suggested that loans of under £150,000 don’t make commercial sense for them because of the high costs involved.

He said that this, together with a general loss of trust in mainstream banks, has put the alternative finance sector in a strong position to cater for SMEs.

Russell told B&C: “We see our service as complimentary to traditional lenders, where we’re able to use our smart lending platform to underwrite at a fraction of the cost and to offer their business customers convenient access to the working capital they need, for as long as they need it, without changing all their banking arrangements.

“The recent losses and settlements announced by the big lenders will only strengthen awareness for alternative finance providers as business customers start to look at the other options available to them.

“Options that are often much better suited to small business needs for flexible and fast access to working capital - especially when a lending decision can take minutes rather than weeks.”

Bob Sturges, Head of Communications at lender Omni Capital believes that the current situation with mainstream lenders represents a ‘golden opportunity’ for alternative lenders.

He told Bridging & Commercial: "I think it is clearly understood that the emergence and rise of the alternative finance sector can be traced back to the problems heaped upon the banking sector during the financial crises of 2007 and 2008.

"At Omni Capital, we have long taken the view that the banks' considerable challenges will not be resolved quickly or easily, [and] we therefore anticipate several more years of opportunity and growth.

“Even were the bankers to pull a rabbit out of the hat, we believe they will struggle to win back fully the confidence of so many impacted by their actions, [and] this presents the alternative sector with a golden opportunity to cement relationships not just for the here-and-now, but for the long-term."

Others have their doubts, saying it will take more than a multi-million pound settlement to drive customers from mainstream bank to alternative options.

Rishi Khosla, CEO of OakNorth Bank, agreed that many customers had become frustrated with their banks over issues such as the PPI scandal, but said this may not be enough for them to consider switching.

He did, however, say that political pressure could prove to be the deciding factor.

Rishi told B&C: “I think issues like this play a smaller part in pushing borrowers towards the alternative lenders, than increased awareness and changing behaviours.

“New banks and alternative lenders still account for a small portion of the market, but there is such a deep-seated frustration with major banks, particularly among entrepreneurs, as well as a growing political agenda to encourage competition, that I think we will see large numbers of customers abandoning the big four or five banks and opting for new lenders.”