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New ideas for SME funding.

Vince Cable, Business Secretary and MP for Twickenham has admitted that small and medium businesses are possibly in a funding rut, despite Project Merlin which was created to encourage bank lending to smaller and more vunerable companies.

Although defending the Merlin Project, Cable opended his arms to the fact that new mechanisms would help those smaller businesses receive the funding they need, but it may seem people are running out of ideas. Under the Merlin Project, high street banks including the Royal Bank of Scotland agreed to lend SME’s £76 billion in 2011. This scheme was meant to help ease the credit problem for companies but has been under attack by its critics who also blame Merlin for the collapse of the banks back in 2008. It’s a very good project, but there needs to be a new injection of ideas and life to raise the bar again for lending.

Once again the team at Select Factoring find this news quite frustrating. Companies are still heading to banks for business funding despite the crack down on loaning money. What companies don’t realise is that they may have assets tied up in the invoices they send out to clients. The difficulty is that they may have to wait up to 90 days for payment. This is when factoring lenders step in and save the day, offering capital within 24 hours against the money tied up in the forementioned invoices.

Companies can have money and quickly, but its their own money if that makes sense, all they have to do at the end of the process, when all the invoices have been paid, is to pay a small fee, which is tiny in comparison to the interest acrued on a bank loan.

Really it is that simple, but the awareness of factoring, invoice discounting and selective factoring is minimal in the financial market.

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