While the government has unveiled a new initiative to encourage women in rural communities to start their own businesses this week, attention refuses to shift from the Budget and its impact on small business finance. At the same time, a new survey has shown the degree to which SMEs are using invoice finance.
The Chancellor’s National Loan Guarantee Scheme is a welcome move, as is the latest small business growth programme aimed at rural businesswomen, in particular as new figures show mainstream SME lending continues to be weak and small business turnover growth remains limited, but that hasn’t stop growing criticism of the measures aimed at small businesses and SME finance in the 2012 Budget.
The decision not to reduce SME lending rates, which according to the Bank of England are an average of 4.5%, has come under fire, as has the move to take no action on the rise on business rates due in April. In addition, the decision to cut corporation tax has been criticised for largely being of benefit only to large companies.
Unsurprisingly, the debate has brought the issue of affordability versus availability in terms of SME credit to the surface again, with small businesses arguing it’s not a case of the former but the latter. This development also raises the role of alternative SME lending again. A recent survey on business finance found that, of the mid-market entrepreneurs interviewed, nearly 30% used invoice discounting and asset finance to raise capital.
Given the current climate and government policy, it seems certain that this percentage will continue to rise in the short-to-mid term as more and more entrepreneurs and small businesses look to invoice finance and asset finance to either supplement or replace high-street SME credit facilities.
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