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Why SME credit database highlights invoice finance importance

If it’s not at one end, it’s at the other. What’s that? Problems with SME finance. After a recent report highlighted the continued impact of late payments, a new HMRC scheme has underlined the ongoing difficulty in securing bank loans. How do SMEs break free? One answer is invoice finance.

While the HMRC pilot scheme for the development of an SME credit database should be welcomed as a positive move, it highlights the continued challenge that SMEs face in securing credit from traditional lenders, despite the introduction of myriad initiatives, such as Funding for Lending.

The database will share a company’s VAT payments data with credit ratings agencies, a link that, it is hoped, will allow banks to make more informed decisions regarding small business lending. A lack of reliable data can often mean that viable businesses are refused loans.

Whether or not the new scheme will be given the green light has yet to be confirmed and it remains to be seen what impact it would have on improving access to SME finance, in particular for the smaller companies that are in most need of a little thawing in positioning by the major lenders.

Nevertheless, the continuing focus on providing better access to small business lending underlines the limited success the government has had to date, and at the same time, why alternative finance products, such as invoice finance, have become so important.

The flexibility and transparency of invoice finance, as well as its ability to reduce the occurrence of late payment, have played a key role in the SME finance product’s rise in popularity. In the face of widespread caution from banks, this SME lending facility is helping maintain vital cashflow.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.

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