The co-founder of equity crowdfunding company Crowdcube has likened equity and debt crowdfunding and invoice finance to “phoenixes rising from the ashes”, underling their role in revitalising the ailing British economy.

The comments and the figures behind them – Crowdcube raised £9 million for almost 40 businesses in the first nine months of this year, compared with £6.2 million for 2012, while the overall use of external finance, including invoice finance, by SMEs grew by almost 40% in the second quarter of 2013 – illustrate how SME finance has changed and how alternative finance has become a key means of sourcing start-up funding and generating capital to maintain cashflow. At the same time, bank SME lending remains limited.

It is no secret that small businesses still face a challenging business environment: following news that SMEs spend millions on tax administration every year and lose money as a result of client insolvency, a new survey from business and finance software provider Exact claims that companies are losing out on as much as £3.7 billion every year because of forgotten invoices.

Alternative finance and the services that are driving the growth of this sector, such as invoice finance, peer-to-peer lending and crowdfunding, are helping to ease the pressure. It is no surprise to see the FCA considering regulatory reform to better accommodate these services, as well as growing high-street lender interest in them.

Being able to call on these products, whether independently or in tandem with traditional bank lending services, is providing a lifeline in terms of accessing SME finance.

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