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Look Beyond the Banks

Bank lending is notoriously hard to secure, so where else can businesses look for funding? The banks are still in retreat, with figures showing that lending to businesses fell in June this year to £489bn, more than 25% below its 2008 peak. Though many businesses aren’t looking to expand during the ongoing tough economic times, the high and rising cost of bank lending is still a problem when it comes to credit supply.

Bank credit is likely to remain scarce, however, until ongoing problems with the Eurozone are solved  and the growth of the UK economy starts in earnest. Business confidence across all sectors needs to recover. There are also international rules on how much capital banks must set aside against different sorts of loans, called Basel 3, makes small business lending a costly proposition - old loans are weighing heavily on scarce capital, limiting the bank’s scope to issue new ones.

So, in the light of all this, where can small businesses turn?

Looking outside the banks, alternative finance options such as invoice finance can help businesses to re-invigorate growth plans as well as helping with day to day cash flow problems. If your business issues invoices on a 30, 60 or 90 day basis, you can take advantage of factoring or invoice discounting to release the funds tied up in unpaid invoices. Instead of being left waiting for payment, you’ll get access to funds within 24 hours.

This is a form of finance that’s available to the vast majority of businesses who trade on invoices – unlike with business loans, there are many willing lenders out there. Looking into invoice finance should be right at the top of your priority list if your business needs funding – don’t think the banks are your only option.

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