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Alternative finance sector boosted by state SME lending failures

As the global economy defends itself against debt crises in the US and the Eurozone, the UK SME sector will be looking on attentively as it waits to see if the government’s small business lending policy will be affected by any fallout.
Will the debt crises in the US and Eurozone force the government to change tack with regard to its small business strategy? As the state considers entrepreneurialism vital to the country’s economic health, it might be moved to offer SMEs more help.
The financial pages have been populated recently with a growing number of stories telling of falling confidence in state SME lending policy. A new study from the Open University, and supported by the Finance & Leasing Association (FLA), only adds more fuel to the flames.
Research from the Open University’s Quarterly Survey of Small Business in Britain showed that tax incentives for small businesses, designed to help these companies invest in new equipment, are too complicated and are failing to boost spending. Another sign that the government is coming up short when it comes to SME lending is the growth of the alternative finance sector.
This growth includes the appearance of websites offering bulk-buying discounts for SMEs, along the lines of the service that Groupon offers consumers. But perhaps more illustrative of this trend is the fact that invoice discounting and factoring and asset finance are now firmly established. With regard to the latter, the FLA reported a 25% increase in asset finance lending in May to £1.7 billion.
It is hard to look ahead in economic terms at the moment, but even if the government does offer SMEs greater support in the short term, it is seems that alternative finance is very much here to stay.
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