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Is this the Budget that alternative finance has been waiting for?

The unveiling of the Coronavirus Business Interruption Loan Scheme and other measures to help small businesses suggest that government efforts to increase funding to these firms may have a broader focus going forward.

While alternative finance has been established as a mainstream small business funding sector for some time, the government has given it little promotion in the Budget – support has been predominantly confined to investment in the British Business Bank, which includes various alternative finance facilities in its services portfolio. That is, perhaps, until now.

The Coronavirus Business Interruption Loan Scheme will be delivered through the British Business Bank to support the continued provision of finance to businesses during the coronavirus outbreak. Notably, the Scheme will temporarily replace the Enterprise Finance Guarantee scheme, which supports the likes of invoice finance and asset finance. Hence, as the Scheme is likely to have a similar framework, alternative finance may have a role to play in a critical period for small businesses.

The launch of the Coronavirus Business Interruption Loan Scheme is one of a number of measures announced in the Budget to help small businesses manage the impact of the coronavirus, including a business rates holiday, statutory sick pay cover, a HMRC tax payment extension and a £3,000 cash injection.

Away from coronavirus-related measures, the government has also unveiled £200 million in new funding for the British Business Bank to invest in scale-ups and £130 million of new funding to extend start-up loans. Again, given the scope of services offered by the Bank, there is the potential for alternative finance to play a larger part in how small business finance services are improved.

And raising awareness of alternative finance offers some clear benefits for small business owners. In the wake of prolonged caution from traditional lenders, alternative finance facilities such as invoice finance, asset finance, peer-to-peer lending and crowdfunding are proving a vital source of capital for small businesses, both for safeguarding cashflow and for essential investment. These facilities, which offer a more personalised approach to lending, are helping small businesses grow.

This is how a small business in Sussex used peer-to-peer lending, through a commercial finance broker that specialises in alternative finance, to raise the capital for new resources.

Budget 2020 is positive for small businesses and alternative finance seems to have been given more coverage. That said, there are still questions marks over longer-term planning in relation to small business finance, including around combating late payment practices, and certainly more can be done to raise the profile of alternative finance.

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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