The banks are failing to solve the SME lending problem on their own, and many experts are hailing alternative finance as the way forwards. James Meekings, co-founder of Funding Circle, argues that crowdfunding is set to steal a big chunk of the small business lending market, alongside invoice finance which is becoming ever more popular. This is what the UK economy needs – a diversifying of the lending environment.
According to recent figures from the Bank of England, lending by the major banks and building societies in the UK fell by £4 billion in the first quarter of 2012, the biggest drop in 2 years. Following these figures, in the summer of 2012 the Federation of Small Businesses revealed that 41% of firms were turned down for bank loans during the second quarter of 2012. This shows that many small businesses are being shut off from valuable finance that they need in order to grow.
The lack of bank lending is a big problem for the government since the start of the recession. The failure of government initiatives such as Project Merlin, the National Loan Guarantee Scheme and others have not achieved what they set out to. Many experts believe that if the recession has taught us anything, it’s that we need to have more variety in the lending environment in the UK – and that’s what crowdfunding and invoice finance offer.
The Federation for Small Business now estimates that small businesses account for more than 99% of all businesses in the UK. So, in order for the UK economy to demonstrate proper growth, there needs to be a lending system which allows SMEs to get access to the finance they so desperately need. This is where new and innovative lending options come in – increased competition in the lending market means there’s more choice and businesses are able to choose flexible forms of lending to address their specific problems.
Invoice finance is a great option if your business struggles with late payment, cash flow or invoicing issues. If your business needs finance and has been turned down for a bank loan or overdraft, then take advantage of the new and diversifying options in the UK lending market.