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Why Funding Circle growth shows invoice finance importance

The Funding Circle has been one of the headline alternative finance schemes and news of planned expansion underlines the role of this sector and the product that leads it: invoice finance.

While the extension of the government-backed Funding for Lending and Start-Up Loans schemes and the British Business Bank have dominated business news, the alternative finance sector has continued to flourish. News that Santander is in discussions to join forces with the Funding Circle in the peer-to-peer lending realm and that SME matchmaking website FundingStore has added the Funding Circle to its panel of lenders is a case in point.

As figures continue to appear showing that traditional lenders are remaining cautious about SME lending and that small businesses are still struggling with start-up funding and cashflow maintenance, it is clear why the alternative finance sector is going from strength to strength and why the SME funding landscape is changing so significantly. The sector remains the smaller partner in terms of small business finance but its size and influence continue to grow.

The importance of peer-to-peer lending and other forms of alternative finance to UK business cannot be understated. Invoice finance is spearheading the growth of the alternative finance sector largely thanks to its transparency and flexibility. It is telling that traditional banks are proving increasingly keen to get a piece of the action: as well as Santander’s interest in the Funding Circle, Barclays is reportedly looking at a move into peer-to-peer lending.

These are very interesting times for the alternative finance market as the boundaries between alternative and mainstream become increasingly blurred. Whatever the short term holds for the SME finance sector, it is clear that products such as peer-to-peer lending and invoice finance have a major role to play.

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