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Banks will have to refer SMEs to alternative finance

Following the decision by Santander to refer SMEs to peer-to-peer lending services, the government has announced that all banks will have to provide access to non-bank finance to businesses that they can’t offer finance to.

The recent announcement sees the government continue to embrace non-bank finance and cements the sector’s mainstream position in terms of small business finance provision. At the beginning of the summer, the British Business Bank unveiled £10 million in lending to SMEs through peer-to-peer lending platform RateSetter. As a part of this broader initiative, the British Business Bank is receiving a £100 million boost.

This latest move underlines the sea change that has occurred in the SME lending landscape in recent years. With traditional lenders proving persistently cautious and state lending schemes unable to fill the finance gap, alternative lending services such as invoice finance, peer-to-peer lending and crowdfunding have emerged as lifelines for small businesses, with regard to start-up funding and generating capital to maintain cash flow. The incorporation of these services by the government in the British Business Bank and its overall business finance policy underlines the extent to which this landscape has changed and the role that non-bank finance now plays.

Indeed, the non-bank finance sector, and the innovation behind its various products, has now become part of the government’s efforts to establish the UK as the FinTech capital of the world. If any more evidence of the profile of non-bank finance is required, then this status is it.

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