News that the government’s Growth Voucher programme has issued £2 million worth of vouchers to over 1,000 SMEs in just two months underlines the role of non-bank finance in driving sector growth.

Despite the upturn in economic conditions and the focus of the Funding for Lending scheme turning exclusively to SME finance, late payment and traditional lender caution continue to put pressure on small business cashflow. The recent declaration on late payment by Small Business Ambassador Karren Brady and new Bank of England figures that show a continued decline in overall business lending highlight the problem.

So, it comes as little surprise to learn that the £30 million Growth Voucher scheme, which offers advice on managing cashflow, dealing with late payments and negotiating finance, is proving popular with small businesses. Its success illustrates the continued frustration with bank SME lending (35% of bank loans are being rejected according to the SME Finance Monitor) and the vital role being played by non-bank finance initiatives.

Invoice finance can help combat late payment and the impact it has on cashflow, and it is the availability of this kind of transparent and flexible service that is seeing alternative finance go from strength to strength. SMEs are increasingly either combining or replacing traditional lending services with the likes of invoice finance, peer-to-peer lending and crowdsourcing. The 121% rise in peer-to-peer lending reported by the Peer-to-Peer Finance Association is indicative of this SME lending trend.

For all the efforts to stimulate SME lending, the success of the Growth Vouchers programme illustrates that long-standing barriers remain in place. It also highlights the clearer path that non-bank finance can provide.

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