The debate over public sector pensions has been headline news, but another subject may displace it this week, in the business pages at least. Bank business lending figures are expected this week and the results could place the government’s small business finance policy under yet more strain.
Early indicators suggest that the figures will be mixed. State-backed Royal Bank of Scotland is expected to struggle to meet its Project Merlin targets, while Lloyds, Barclays and Santander are set to post more positive results. Under Project Merlin, banks have agreed to SME lending of £76 billion in 2011.
Even if these predictions prove correct, as RBS is the larger small business lender, the government can by no means breathe a sigh of relief. A significant number of recent reports have suggested that small businesses are losing faith in state SME lending policy. A slew of bad figures this week could force the government to act, in particular following data from the Bank of England showing that lending to private, non-financial companies fell for the fourth successive month in June.
What might the government do if they are compelled to act? Well, VAT cuts have been mentioned before, but as much as Vince Cable is unlikely to pull his punches, this topic is fast becoming a political hand grenade that even he won’t want to explode.
Where does this leave alternative business finance, such as invoice finance? Well, perhaps with a big opportunity. Invoice discounting, factoring and asset finance offers SME lending that doesn’t carry the red tape and potential risks that big bank lending does. Will the second half of 2011 be a big six months for invoice finance?
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