MORE small businesses in Britain are turning to alternative funding to close the gap left by traditional funding providers, according to figures from PayPal.

The amount of funds advanced by its small business finance product, PayPal Working Capital, has risen from £400 million in June 2017 to a total of £625m today.

Since launching in 2014, 80,000 PayPal Working Capital cash advances have been secured by more than 30,000 businesses which have benefitted from a share of the £3.6 billion ($5bn) that the product has provided globally.

The new figures mark a 56% increase over the past 12 months in the total amount advanced, suggesting a need for alternative business financing which bridges the gap left by traditional funding providers such as banks.

Of the PayPal Working Capital advances issued in the past year, 70% were made outside of traditional bank branch hours.

One third of the advances were made to small businesses in postcodes where 50 or more bank branches closed in the last four years.

Norah Coelho, director of business financing at PayPal UK, explains, “Almost a decade after the credit crunch, many British small businesses are still struggling to get funding for their future development. We launched PayPal Working Capital in the UK in 2014 to help fill this funding gap.

“It’s obviously meeting a real need, as since the launch PayPal has advanced £625 million to more than 30,000 British businesses.

“The banks will always play an important role in business financing, but we’ve found that over 70 per cent of PayPal Working Capital funding was issued outside traditional UK bank opening hours.

Coelho continued: “We’ve replaced the lengthy in-branch application process for traditional business finance with a fast, online alternative for PayPal’s small business customers.

“As PayPal knows the applicant’s business, we typically approve and issue a cash advance in minutes. The business owner can spend the time saved on what really matters: running their business.”

Using data to bypass the longer application process of traditional business finance, PayPal Working Capital provides businesses with a cash advance of up to £100,000 on their future sales. Repayments are applied automatically as a fixed percentage of a business’ PayPal takings, which gives them flexibility to pay back only when they’re making sales. There is one fixed, upfront fee and no late or early payment charges.

Aaron Flanagan of small Belfast-based comic book business Comic Book Guys, says limited cash flow held his business back: “Unless we got a lot more stock and gave the store a re-vamp, we couldn’t grow any further. We needed funds to do that, but our cash was tied up with the stock we already had.

“It’s one of the biggest challenges for any growing small business: you can’t buy your next comic with an old comic.”

Traditional bank funding methods did not appeal to Flanagan.

He said: “Interest rates were high and the application process was intense – as a small retailer, you don’t have the time for all those forms. But with PayPal, we applied and received the funds in our account in the same evening.

“We’ve seen the number of people visiting the shop increase, and sales and awareness are up. Comic Book Guys has become a bit of a destination store.”