News that the government-backed small loan scheme The Start-Up Loans Company has been inundated with applications highlights not only the demand for SME credit but also the importance of invoice finance in today’s marketplace.
One of the key criticisms of the government’s small business lending schemes, from Project Merlin to the Funding for Lending programme, was too great a focus on the larger end of the SME scale. In short, there wasn’t enough provision made for smaller companies and the need for relatively smaller amounts of credit. Demand for funding from The Start-Up Loans Company, which has received almost 2,000 applications in just four months, gives credence to this argument. The company is aimed at entrepreneurs aged between 18 and 24 and offers loans of comparatively small sums.
At the same time, the clear demand for small business funding on a relatively minor scale, initially at least, reinforces the role of invoice finance as a key SME finance facility. Services such as invoice discounting and factoring provide quick and straightforward access to such sums without the need for long-term contracts. Businesses can pick up and put down these services as and when they’re required, providing the flexibility that traditional banks have been generally very cautious about offering.
Interestingly, also making the headlines is news from Prudential that almost half of SME owners have no pension plan in place. The last year has witnessed a slew of new alternative SME finance products appear on the market, including services such as payday loans, and in light of the new findings about retirement planning, there is a case to be made that invoice finance is the better and more secure choice as it allows for greater personal saving.
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