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Saatchi radical SME plan in line with non-bank finance rise

It was interesting to hear Lord Saatchi’s radical policy proposal for SME growth, not least as it’s possible to see the influence of non-bank finance.

So, what have the suggestions put forward by former Conservative Party chairman Maurice Saatchi got to do with non-bank finance and the growing popularity of services such as invoice finance, peer-to-peer lending and crowdfunding? Well, the link lies in the move away from traditional thinking.

Abolishing corporation tax for SMEs with fewer than 50 employees and capital gains tax for investors in small businesses, as Saatchi is calling for, certainly goes against the grain of established policy, but that’s not to say that it won’t provide small businesses with the boost that a slew of public sector initiatives and traditional lenders have so far failed to deliver.

Indeed, the decision by an increasingly large number of SMEs to turn away from traditional sources of small business finance, whose cautious attitude has limited access to funding, has fired the rise of the non-bank finance sector to such an extent that these alternative services are now considered mainstream.

Lord Saatchi claims that his proposal would expand employment, increase competition and generate stronger economic growth. Whether anyone listens to him remains to be seen, and given that the government generates £8 billion in corporation tax from SMEs every year, it seems unlikely that it would take such a step.

Then again, what has been the cost of the Funding for Lending scheme and other assorted SME finance initiatives? The success of non-bank finance proves that taking an alternative path can pay off, so maybe Lord Saatchi’s proposal should be give some more thought.

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