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Rise in invoice finance as alternative funding access grows

As debate continues over the government’s efforts to improve access to SME finance, the use of invoice finance and factoring goes from strength to strength.

According to the Asset Based Finance Association, use of export invoice finance rose by 20% in Q2 2013 and export factoring by 29%. The growth came at the same time as overall UK exports within the EU rose to £13 billion, a rise that has been nurtured in part by the Direct Lending Scheme. However, with the initiative seemingly more suited to larger companies, smaller firms have been more reliant on alternative finance services.

The suitability of government SME finance schemes has long been a contentious point. While funding has been made available, a key criticism has been that the frameworks of these schemes have been designed with medium-sized companies, rather than small businesses, in mind. Hence the growth of the alternative finance sector and the movement of services such as invoice finance into the mainstream SME funding arena.

Tellingly, the Financial Conduct Authority has recently announced that crowdfunding will become more accessible from April 2014, when a change in regulation will come into force. The regulator expects investments to increase fourfold. Alongside invoice finance and peer-to-peer lending, crowdfunding has emerged as a key alternative finance service, helping companies generate start-up funding and capital to maintain cashflow.

As minds focus more intently on the introduction of the British Business Bank and, indeed, the fate of the Funding for Lending scheme, in relation to its SME finance targets at least, it is becoming increasingly clear that alternative finance products have a central role to play in revitalising the UK business sector.

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

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