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How alternative finance can give the economy a £240bn boost

The SME sector could be worth over £240 billion to the UK economy by 2025. But the conditions for growth have to be right. Much depends on alternative finance.

According to new data from specialist commercial bank Hampshire Trust Bank, SMEs in the country’s top 10 cities will contribute £241 billion to the UK economy by 2025. That’s an increase of almost 20% compared to the figure for 2016. In short, the importance of small businesses to the financial health of the country is set to grow.

But will this growth happen? The current state of the market and the various policy-related financial pressures facing small business owners puts a big question mark against this forecast.

How can a sector battling against Brexit-borne market headwinds and suffering under the burden placed on capital by the likes of pension auto-enrolment, cyber-security enhancement, minimum wage requirements, national insurance contributions, cashless tech advances, rising business rates and a continued failure to address the problem of late payment, achieve this kind of growth?

New figures from rates specialist CVS estimate that business rates increases will total £152 million in April 2018. It’s hard to tally this kind of outlook with a significant growth in the contribution of the SME sector to the economy.

However, that’s not to say such growth isn’t possible. Far from it. For small business owners, being able to afford investment and achieve prolonged growth is largely a matter of access to finance. And this is where alternative finance comes in.

Although there are signs of some improvement, traditional lenders are still entrenched in cautiousness when it comes to small business lending. That’s why, in part at least, alternative finance has grown so dramatically in recent years to become an integral part of the SME lending landscape.

More and more small business owners are looking to services such as invoice finance, asset finance, peer-to-peer lending and crowdfunding to raise capital to safeguard cashflow and facilitate expansion. This is how a company in the south of England used peer-to-peer lending to finance investment in new equipment.

And based on the current political confusion governing market performance and the continued policy-related fiscal demands on small businesses, the role of alternative finance is set to grow even more important going forward, especially if SMEs are going to hit the growth targets that will help them increase their contribution to the national economy.

The accessibility, affordability and flexibility that alternative finance offer are crucial to SMEs whose ability to grow is being hampered by significant headwinds. This is why alternative finance is so important to helping the UK economy get a £240 billion boost.

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

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