So, Nick Clegg is rattling the sabre by suggesting that banking reforms could be implemented well before 2019, but away from this political posturing, a new survey suggests that one of the government’s principal small business lending schemes is coming up very short.
The report claims that the money offered under the Enterprise Finance Guarantee (EFG) scheme fell by 40% for the year to July 2011, from £742 million to £433 million. It goes on to say that £93.1 million was made available to small businesses in the second quarter of 2011, compared to £250 million in the same period in 2009.
This is quite some deceleration in business finance provision. Clearly, the economic environment is a key factor, but this will nevertheless be fuel for those campaigning for greater help for SMEs in terms of business lending from the state.
What can the government do to help SMEs and alleviate some pressure? Well, it could expand schemes such as the EFG or help with the promotion of non-traditional business finance products from non-high street providers, such as invoice discounting and factoring.
As these AFBA figures show, the use of invoice finance by SMEs is growing strongly, as companies are increasingly unwilling or unable to engage with traditional business lenders, whose products are perceived as restrictive and unwieldy. Simplicity and transparency are key benefits of invoice discounting and factoring, and they are attributes that more firms would certainly welcome from business finance products.
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