It’s now coming up to six months since the Breedon report, which predicted a funding shortfall of between £84bn and £191bn over the next five years. However, has anything been done in response? After all, with such a grim prediction for small business funding, you would hope that something would be done sooner rather than later.
Of course, these things take time, but have we seen any progress? One difficultly in ascertaining whether anything has been done is the importance of distinguishing between new lending and funding for businesses as opposed to re-badged lending that would have been made regardless. The Funding for Lending scheme, for example, has raised suspicion that it has simply allowed banks to secure guarantors for advances made as part of their day to day lending activities.
With so many different lending schemes and initiatives floating around, there’s also a danger of trying to be too clever. The Breedon report suggested the launch of an aggregation agency which would take care of lending directly with SMEs, or would at last work closely with the banks. The real intention here was a more streamlined system like that in Germany, with its state sponsored bank which takes care of exactly these functions. However, this is still a work in progress, if it’s actually making any progress at all.
So, with all these difficulties and obstacles surrounding bank lending, where else can small businesses turn? Alternative funding is one way that the government is turning in order to fill the projected funding gap turned up by the Breedon report. Invoice finance in particular has been championed by many experts; while this form of lending isn’t new, it can still provide a flexible cash flow solution for a whole range of different business sectors.