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Does less red tape mean more SME lending?

The government has slashed red tape worth billions of pounds, but some industry sources are saying that this isn’t enough. What’s the next move for the coalition and should it be focusing more on improving the state of SME lending?
As part of its plan to nurture SME growth, the government promised that it would reduce the amount of red tape for businesses. The Department of Business has announced that, in 2011, it has done so to the tune of more than £3 billion – gold star for the government? Not according to the British Chambers of Commerce and the Federation of Small Businesses, which both claim that new regulations, in particular the agency workers directive, are set to undo all this good work.
So, is it a case of one step forward and two steps back for the government’s attempts to help small businesses by reducing red tape? Only time will tell. Perhaps the state would be better off channelling more energy into solving the problem of SME business banking. According to the Centre for Economics and Business Research (Cebr), the SME funding gap stands at £28 billion.
As traditional business lenders seem unwilling to bridge this gap, perhaps it’s time more emphasis was placed on non-bank SME lending, such as invoice finance. A recent report from Cebr claims that asset-based finance, including invoice discounting, could help meet this shortfall. It goes on to say that up to 650,000 businesses in the UK could be eligible for this type of business finance product.
Asset finance and invoice finance are becoming increasingly popular (as these figures show), but perhaps this growth is just the tip of the iceberg.
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