Vince Cable has launched a £200 million SME investment programme, but with banks still cautious over SME finance, is it the right vehicle for credit-starved small businesses? Conditions suggest that alternative finance services, such as invoice finance, look set to play an ever larger role.
The GrowthAccelerator programme for small businesses includes advice on securing finance for SMEs, which is a positive development that should be of benefit and should be applauded. However, the feeling remains that more direct action needs to be taken with regard to small business lending. Recent reports on mainstream bank SME lending suggest that conditions remain challenging as ever, a status quo that suggests small businesses need more than just expert business coaching.
The argument for more action from the government on SME credit continues to be a popular one: the British Chambers of Commerce have recently gone on the record again calling for the government to increase the flow of lending to credit-worthy businesses, even going as far as suggesting the introduction of a negative interest rate on deposits held by banks in the Bank of England to stimulate lending. Deputy Prime Minister Nick Clegg has called for the amplification of the £20 billion credit easing scheme.
So, what does the future hold for small businesses in terms of SME finance? With banks holding firm over their positions, it seems the answer lies increasingly in alternative finance, including services such as invoice discounting and factoring. These services look set to play an ever greater part in facilitating SME lending and stimulating much-needed sector growth.
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