While debate continues on SME prospects in the months ahead, new research shows that nearly a third of British entrepreneurs are targeting international market growth in 2012. Such expansion will involve some SME finance, which raises the question: high-street bank SME lending or alternative lending, such as invoice finance and asset finance?

The data, featured recently by the British Chambers of Commerce, suggests that nearly a half of these entrepreneurs consider Western Europe as providing the best opportunities, with Eastern Europe and North America attracting the most interest after that. The report goes on to say that some of this expansion may take the form of overseas acquisitions.

Should this development happen, it will be interesting to see where these entrepreneurs generate their finance. In the case of SME lending, the high-street may not produce the required results if the British Bankers Association’s recent Lending to Business document is anything to go by. It is clear that the banking sector still puts a lot of emphasis on lack of demand from the SME sector as a reason for low SME credit availability.

Government efforts to improve small business lending facilities may change this situation, but perhaps not immediately. So, if the high-street banks can’t tick all the boxes, the spotlight falls on alternative SME lending products.

Figures published in late 2011 show invoice finance, including facilities such as invoice discounting and factoring, to be growing strongly in popularity and newer data from the Finance and Leasing Association illustrate a similar trend in asset finance. According to the association, asset finance new business grew in November 2011 to almost £1.9 billion, an increase of 29% compared with the previous year. The strongest growth was reported in business equipment finance.

The year ahead certainly holds challenges for SMEs but also opportunities, and it seems certain that alternative SME lending facilities, such as invoice finance and asset finance, will play a key role in helping companies meet the former and take advantage of the latter.

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