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SME lending lift shouldn’t mask need for better finance access

New Bank of England figures show that SME lending rose by £159 million in February. However, the rise shouldn’t mask the need for better access to SME finance.

Tellingly, while small business lending rose for the month, according to the Bank, overall business lending fell by £750 million. The rise in SME lending is welcome news, but the government has had to work hard to achieve it – not least by refocusing the Funding for Lending scheme exclusively on small business finance – and the continued decline in total lending paints a truer picture of the business funding landscape.

The government has been criticised for not giving alternative finance enough headline space in the 2014 Budget, but a recent move to pair SMEs turned down for finance by the banks with alternative lenders suggests it considers alternative finance and services such as invoice finance and peer-to-peer lending as having a central role to play in reigniting the UK economy.

Much is made of the growing optimism of the country’s small businesses and a new study from Barclays has reiterated this confidence – according to the bank, SME income at the end of 2013 was at its highest since the start of the recession. However, an inability to raise finance from banks is a major barrier to realising this growth potential.

The Skills and Enterprise Minister has declared that SMEs are at the heart of the government’s long-term economic plan. If small businesses are to fulfil this role, the recent growth in SME lending can’t be a one off. Support for non-bank finance must keep growing.

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