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Why 2017 will be the year of non-bank finance

The small business sector isn’t likely to look back on 2016 with much fondness. Market uncertainty dominated the year and 2017 promises more of the same. That’s why non-bank finance will have a key role to play in SME growth.

New data from the Federation of Small Businesses show a steep rise in the number of small businesses blaming rising business costs on the weakening of the pound. The impact of the development in exchange rates and rising inflation puts into perspective the optimism that some chose to draw from currency trends earlier in the year.

So, going into 2017, small business owners must bear the costs not only of auto-enrolment, the National Living Wage, cybersecurity requirements and changes in dividend tax rules, but also of rising inflation. While it is true that there are some positives on the horizon, such as the reduction in corporation tax, it is clear that the financial pressure on SMEs will remain significant.

This is why non-bank finance and services such as invoice finance, asset finance, peer-to-peer lending and crowdfunding will be so important to small businesses in 2017. The alternative finance sector is taking an increasing share of the SME finance market and, next year, this piece of the pie could become significantly larger as companies have to deal with yet more market instability and traditional lender caution.

As 2016 draws to an end, new figures from the Asset Based Finance Association underline just how fast non-bank finance use is growing. In Q3, asset-based lending use by businesses in the UK reached a record £4.3 billion, compared with £3.5 billion for the same period in 2015 (a sharp 22% increase) and £2.5 billion in Q3 2011 (a staggering 71% rise).

Given the economic outlook and the political decisions that have to be made in 2017, it seems highly likely that asset-based finance use will continue to grow strongly over the next 12 months. Amid increasingly challenging conditions, flexibility, accessibility and affordability will become increasingly important to growth.

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

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