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What is driving small business lending growth?

Despite some strong headwinds, small business lending grew significantly for the year to June 2016. One of the main growth drivers was invoice finance.

According to the National Association of Commercial Finance Brokers (NACFB), small business lending increased by 30% between July 2015 and June 2016. The level of SME lending, at to £20.7 billion, represents a post-recession record and comes despite the uncertainty caused by Brexit and pressure on cashflow caused by the likes of late payment, cybersecurity and pension auto-enrolment.

One of the key factors behind this expansion in business lending was invoice finance, which NACFB data showed grew by almost 23% over the 12-month period. Other key areas of growth were commercial mortgages, leasing and equipment finance, development finance and bridging finance. The figures underline the important role that invoice finance plays in today’s business finance market and its prominent position in the alternative finance sector. According to the Asset Based Finance Association, invoice finance represents 80% of all asset-based finance in the UK.

Looking ahead, while Brexit has not brought the gloom and doom to UK businesses that many forecast – the Bank of Cyprus is the latest institution to report higher than expected confidence levels in its Owner Managed Business Barometer – the true impact is not yet known and based on current analysis, it seems likely that firms will face, to some degree at least, more challenging conditions in terms of trading in the EU.

Add in financial burdens relating to pension planning, payment policy and workplace security, and it is clear that next 18 months won’t be plain sailing for SMEs. Access to affordable finance services that provide flexibility and reliability will be essential if they are to thrive. Invoice finance already plays a key provider of small business lending and this role only looks set to grow bigger.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.

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