New research has revealed fast growing mid-market businesses can now access financing options that were previously only available to large corporates.

The research, commissioned by business and financial advisers Grant Thornton, demonstrated direct lending into mid-market companies is driving innovation and building a new asset class for investors.

Birmingham-based Geoff Davies, head of Grant Thornton’s advisory business in the Midlands, said: “The proliferation of non-bank lenders has been a key driver of innovation and these firms are an exciting source of funding for mid-market companies.

“Previously, only large corporates could access such products, which allow management to reinvest more cash back into their business to grow.”

Grant Thornton’s recent Agents of Growth events, conducted with leaders from mid-market businesses around the UK, highlighted the vital role access to finance plays in business growth.

In a snapshot poll taken at the event in Birmingham 48 per cent of Midlands business leaders said alternative forms of finance were important to their businesses, with 30 per cent citing access to capital as a significant barrier to growth,

The results of Grant Thornton’s Capital for Commerce research suggest dynamic organisations are exploring increasingly innovative solutions to overcoming this challenge.

The research findings revealed  79 per cent of respondents are now positively inclined towards non-bank lenders – defined as financial firms that lend to businesses but do not accept deposits.

The survey of 100 UK mid-market companies and 100 non-bank lenders (including private equity, distressed, credit and hedge funds) also showed that when it comes to choosing a lender, the largest share of mid-market respondents (34 per cent) identify access to capital as the most important factor, followed by terms and pricing at 23 per cent and just 10 per cent valuing existing relationships.

Out of the sources of non-bank finance available, over half of companies (56 per cent) have used credit funds. This is followed by private equity firms with a direct lending arm (49 per cent), junior debt funds (40 per cent) and asset backed lenders (39 per cent).

Despite the clear benefits non-bank lenders present, hesitancy still exists. Only 21 per cent of those mid-market corporates that have not yet used non-bank lenders would consider doing so in the future. Reasons for this reluctance included perceptions around high rates of interest.

Mr Davies added: “For firms yet to use non-bank lenders, there still seems to be some education required on what benefits non-bank lending can bring and it is worth keeping in mind that corporate respondents in our study had resoundingly positive experiences with them.”