Despite a fall in unemployment and inflation in June, it is clear that confidence in the economy remains low. A recent survey on SME lending has underlined this fragility and placed yet another question mark against Project Merlin. What options do these companies have?
Big bank lending to SMEs has long been a key issue for the government, not at least as it has singled out these companies as central to reviving the economy. However, a survey by research consultancy BDRC Continental will cast more doubts on this strategy and, in particular, the performance of Project Merlin.
According to the report, small businesses are still suffering from a lack of lending support from the big banks. As well as citing failure rates for overdrafts and loans, perhaps more importantly, it highlights a fundamental reluctance among a significant number of SMEs to apply for credit. Why are SMEs feeling discouraged? According to the report, the current economic climate, the cost and time involved and a fear of losing control of their businesses are the main reasons.
So, where do these companies go? What alternatives are there to traditional bank lending? Invoice discounting and factoring is one, while asset finance is also becoming increasingly popular. SMEs are turning to these forms of finance instead of bank overdrafts and loans.
The economy is at a vital juncture. If SMEs are to play the role the government wants them to, more help is undoubtedly required. But these companies can also help themselves by making use of alternative finance services such as invoice discounting and factoring.
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