In the wake of the new government initiatives for small business funding, there are new considerations for bundling together loans for SMEs in order to make them more attractive for the big banks.
George Osbourne is considering packaging small loans together and creating a market to sell them to investors, in order to inject more cash into the small business funding sector. The government is also considering extending its £20bn credit easing scheme for small and medium businesses, if there is enough demand.
By injecting new, private investment into the sector, the government is hoping to boost growth and fill the estimated funding gap that businesses are forecast to experience in the current situation. Deep public spending cuts coupled with bank reluctance to lend, along with businesses being reluctant to take on more debt, has meant growth and recovery are still slow.
The idea of creating an agency to package, or securitise, business loans and then sell them on to investors is one that the government is considering, which the Chancellor reiterated on Tuesday.
There are considerations, however. Transparency about the lending process and quality of the loans is important for both investors and businesses alike. There are no examples of this loan bundling working on a large scale since the recession, and it does present major challenges.
Business funding does not have to present such insurmountable obstacles. If your business needs quick, secure and flexible funding, then asset finance and invoice financing could be an alternative option to consider. These can be used as and when your business needs to, making it straightforward and affordable to get the funding needed for growth as well as day to day running.