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Election forecast: the rise and rise of alternative finance

The 2015 Budget may have been the equivalent of a hand on the shoulder and an encouraging word in the ear for SMEs, but it is alternative finance that is powering growth in this sector.

In the wake of the Budget, it is clearer than ever how small businesses will achieve the growth that the government so keenly wants them to post: alternative finance. Peer-to-peer lender ThinCats has reportedly broken the £100 million lending barrier, while the FundingCentre has been launched and the British Business Bank has invested £6 million in a fund for clean technology.

Perhaps more pertinently, discussion around the first Small Business Act is becoming increasingly focused on the role of alternative finance, and in particular the process through which small businesses turned down for loans by the big banks will be recommended to alternative finance providers. Concern is growing that this process will be a lengthy and onerous one for businesses, thus making the initiative largely ineffective. The reply from the British Business Bank has been to suggest that delivery partners are made part of the initiative – it’s a promising move but we’ll see how the banks react.

Overall, alternative finance is going from strength to strength, as recent figures from the Asset Based Finance Association and the growth of alternative finance providers testify. This momentum and that of SME sector development must be nurtured – so as the election nears, we expect to see more backing of alternative finance.

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