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Small- and medium-sized-enterprises (SMEs) whose customers pay by direct debits should turn to “enterprising alternative lenders” when looking for funding, ArchOver has claimed.

Peer-to-peer business lender ArchOver said that some of the larger lenders do not want to be in control of all the money in the event of a business failure.

With a direct debit, a lender’s fixed charge becomes a floating charge and many of the larger finance providers do not want this, even though they would still receive most of the proceeds in an administration/liquidation scenario.

“You would have thought that any SME able to persuade its customers to pay by direct debit would have cause to celebrate – even more so the company’s creditors,” ArchOver said in a blog post on its website.

“After all, the ability to predict cash flow in a small business can be vital to leading a less stressful life, or even survival. Sadly, not everyone shares that view.”

However, ArchOver highlighted that some large lenders turn away sensible, quality borrowers simply because the money comes into the company’s coffers through direct debits.

“How crazy is that – and how inflexible and downright greedy,” ArchOver said in the post.

“Fortunately, not everyone in the business of lending to SMEs adopts the same attitude.

“Loans are not a ‘one size fits all’ financial product, especially when it comes to smaller, usually younger companies starting out.

“Alternative lenders like ArchOver are using technology to streamline and improve processes that once would have taken weeks or even months.

“We are also looking at other, less traditional asset forms for loan security.”

The platform said that alternative lenders are more flexible and adapt to accommodate the needs of borrowers.

Read more: ArchOver simplifies loan categories

“We don’t sneer at loan applicants and treat them with suspicion, and most definitely we are not looking for reasons to turn business away because it doesn’t conform to a convenient formula,” ArchOver said.

“A floating charge is still a charge and, if necessary, we can find other ways of saying ‘yes’, possibly by reducing the size of the advance.

“Either way, SMEs attempting to bring order to their business in these rocky times should not be penalised.”

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