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Is the bank monopoly on SME lending at an end?

Is this the end of the major banks’ monopoly on SME lending? Alternative SME finance has long been a key topic of discussion and a new report has shown that small business owners are turning to an ever-growing number of alternatives to SME bank lending, including invoice discounting.
According to the Centre for the Study of Financial Innovation (CSFI) report, published in the Financial Times, business owners have identified dozens of alternatives to traditional bank small business lending. The list includes the likes of invoice discounting, crowd sourcing, retail bond schemes, peer-to-peer lending and more, and the paper goes on to outline a number of success stories of people using alternative SME credit schemes, often in tandem with high-street bank facilities, to get start-ups on their feet and inject funds into ongoing concerns.
The findings of the report and the examples to which it links are welcome news for the SME sector that continues to battle strong headwinds, including difficulties in raising capital from traditional banks to build businesses and maintain cash flow, and pressure on business confidence. The degree of innovation involved in the pursuit of securing small business credit is impressive in itself.
Some SME lending schemes are newer and more established than others, and although they don’t need reminding, small business owners should tread carefully. That the list of new SME credit facilities from the CSFI includes short-term business loans (with high rates) from Wonga, the payday loan lender, is a case in point.
Invoice discounting and factoring feature on the list and have the advantage of being more established SME finance products. These small business credit facilities have a history of transparency and flexibility, which gives them an instant advantage over some of the newer lending innovations. Invoice finance has emerged as a major alternative to bank SME lending in recent years and its establishment as a mainstream small business credit product surely can’t be far off.
To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk

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