News that the government is investing £5 million in an SME invoice purchasing scheme underlines both how the small business finance landscape is changing and the role of invoice finance.

The Department for Business Innovation and Skills is making the multi-million pound investment in the online invoice purchasing scheme MarketInvoice as part of the Business Finance Partnership. The move is the latest micro SME finance initiative that the government has set up or invested in, alongside macro schemes such as Funding for Lending, and is illustrative of the growing importance attached to alternative finance and, in particular, invoice finance.

Despite an upswing in the economy and the efforts of such schemes as Funding for Lending, small businesses continue to find it difficult to access start-up funding and working capital. That the marketplace is witnessing a growing focus on invoice finance speaks volumes. The alternative finance sector goes from strength to strength and it is telling that traditional lenders are trying to get a foothold in this market.

The announcement of this investment comes at the same time that the chief executive of Business and Commercial Banking at RBS and NatWest has taken to the Small Business Advice week website to urge SMEs to come to banks first when it comes to SME finance. This is a brave statement in view of the long-held frustration with traditional lenders and the growing evidence that alternative finance can be equally, if not more, helpful.

The best option arguably lies in the astute use of both products – employing invoice finance in tandem with traditional business bank services – but it is clear how central this alternative finance product and others are to the provision of SME finance.

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