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Why an alternative to bank lending is critical for SMEs

News of a decline in the value bank lending to SMEs underlines the importance of alternative finance. It is clear that, with accessing finance through traditional lenders still challenging, business owners need to consider all the funding options available to them.

According to new research, the value of bank loans to SMEs fell by over half in 2018. A decline in this kind of lending was reported for over half of the postal areas in Britain surveyed for the study. A fall in the value of bank loans was also recorded in 2017.

The sharp decline in 2018 is linked to Brexit and the effect it continues to have on the market. It comes as little surprise to see banks remaining cautious at a time of such uncertainty, particularly as the prospect of no-deal exit from the European Union still remains a possibility.

Tellingly, a new study has revealed than more than one million SMEs, equal to around a quarter of the total in the UK, see Brexit as a major obstacle to success. This follows on from findings published by the Cooperative Bank that found that Brexit’s effect on the economy was their primary concern for 2019.

So where does this leave SMEs?

At this extraordinary time, the sector, which plays a critical role in the UK economy in terms of revenue generation and employment, needs more than ever to be able to access funding on affordable and flexible terms; not least to safeguard capital and maintain cash flow.

This is why alternative finance is so important to the country’s small and medium-sized businesses. These firms have long battled caution on the part of traditional lenders; this institutional positioning has been a major driver of the popularity of services such as invoice finance, asset finance, peer-to-peer lending and crowdfunding.

The current crisis only underlines just how essential these facilities are, not just in ensuring that SMEs can ride out the Brexit-related turbulence but also capitalise on any opportunities that it may throw up.

More and more businesses are integrating alternative finance into their financial planning and given the state of the marketplace, the number will only continue to grow. This is how a Sussex small business used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise the money to buy new equipment.

The growing profile of alternative finance has been a key business trend of recent years and reports that the value of bank lending to SMEs has dipped sharply only reinforces the message to SMEs that they need to make use of all the business funding options available to them.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.

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