HSBC has followed Lloyds in announcing a multi-billion pound fund for SMEs. So what is driving the previously cautious lenders to unveil such investment? Alternative finance is among the key factors.

The dust has barely settled following a general election result that few saw coming and HSBC has already announced a national £8 billion SME fund that will be allocated in 43 local tranches across the UK. In addition, the bank is waiving or refunding its arrangement and security fees on qualifying business loans in the short term.

The victory of the Conservative Party, which is widely considered pro-business, is likely to have been a factor behind the decision by HSBC as the country’s businesses look ahead with some optimism. However, the political makeup of the government isn’t the only driver – Lloyds made a similar pledge some time before the election – the rise and rise of alternative finance has played a key part in the shift in strategy.

Traditional lenders won’t have failed to notice just how popular and successful alternative finance services such as invoice finance, peer-to-peer lending and crowdsourcing have become in recent years, and how they have established themselves as mainstream SME lending services. It’s no coincidence that banks have increasingly integrated alternative finance into their own business lending offerings.

Furthermore, banks will have also been aware of the fact that SME attitudes towards them have remained hardened. The recent revelation that small businesses have been subject to hidden fees with invoice finance contracts with banks will have nothing but cement this standpoint. Hence, the need to introduce headline-grabbing nationwide SME funding.

An improvement in access to SME funding is undoubtedly welcome and it is something that the alternative finance sector should be given credit for.

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