Looking at the small business lending landscape means taking into account all different viewpoints, from the SMEs themselves, to the banks and politicians. With SME lending being hard to access, trying to get funding can only be made more transparent by looking at what’s going on across the whole country.
What the SMEs Say
Many businesses are looking to alternative finance solutions in order to fund growth. This is because the lack of lending at sensible rates from the banks. In the light of the double dip recession, it’s all the more important to help the economy achieve stable growth in the next few quarters. The lack of lending is seen as the main obstacle to this by many SMEs, who the government needs to play a key role in revitalising the economy.
What the Politicians Say
Ed Balls has recently confirmed that lending to small businesses has contracted. This has lead many businesses to look elsewhere for lending, often overusing overdrafts or business credit cards. These ways of lending operate at much higher rates than loans. The advent of Wonga’s small business loans adds another expensive way of lending into the mix. However, the government has championed alternative finance measures such as invoice finance and factoring as a way to plug the funding gap that’s opening up in the UK.
What the Banks Say
Banks are looking to minimise their risk – this involves turning down riskier loan candidates, which are often small or start up businesses without a huge and successful track record. Unfortunately, these are the types of agile and adaptable businesses which will create jobs, growth and help the economy to recover. Without funding, they are starting to struggle. Banks see helping small businesses as more than just finances – they believe getting to know the problems SMEs face will be key.
These problems often include late payment problems which cause cash flow issues, which have been the undoing of many otherwise successful businesses. Invoice finance can help with both these issues, getting flexible, secure and fast financing to those small businesses in need of funds.