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Start-up Loans milestone marks alternative finance advance

The issue of the one thousandth loan by the Start-up Loans company has underlined the advance of alternative small business finance at a time when pressure continues to mount on the government to do more to improve access to SME credit.

Only a few weeks after the prime minister pledged millions in extra funding, the government’s low-interest loan scheme aimed at young people wanting to start businesses, the Start-up Loans company, has announced that the number of loans it has made has reached four figures. The popularity of the scheme, whose viability was initially questioned over a perceived lack of potential interest, has emphasised how central alternative finance has become to small business development.

As traditional banks remain cautious in their approach to small business lending, with the Funding for Lending scheme as yet to have much of an impact (much to the frustration of the Business Secretary), alternative finance services, led by the likes of selective invoice discounting, have continued to fill the gap and offer start-up funding and capital to maintain cash flow.

The challenges faced in accessing SME finance, and the necessity of schemes such as the Start-up Loans company and services like selective invoice discounting, have been highlighted again recently with the British Chambers of Commerce taking the opportunity of the announcement of a new Bank of England Governor to reiterate the need for a British Business Bank, that it has been proposed, will bypass traditional banks and include an element of alternative finance.

At the same time, a new study by the CentreForum think tank has called on the government to encourage SMEs to access more equity finance. It has identified better access to equity finance as a key means of reducing reliance on debt and, crucially, of nurturing business innovation and economic growth.

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