After Project Merlin, the Credit Easing programme and countless other initiatives comes another scheme to kick-start business lending and improve SME credit availability. This latest Bank of England small business lending plan is worth £80 billion, but will it work? And what does it mean for the likes of invoice finance?
Despite the prospect of billions in new small business loans as part of a new scheme to help shield the UK’s banks from the eurozone crisis, the initial reaction has been cautious, not least thanks to the lack of progress made by previous SME finance initiatives. Indeed, the announcement of this latest plan can be interpreted as an acknowledgement that Project Merlin and other plans have failed.
So, will this latest SME lending scheme suceed where its predecessors came up short? Such an injection of funding is certainly welcome, although it remains to be seen if and when bank attitudes to small business lending thaws.
This is, in part, an issue raised by the British Chambers of Commerce, which has questioned whether the new funds will reach what it calls the real economy. Interestingly, it raised the prospect of a dedicated SME bank again, a move that perhaps reveals doubt over whether companies across the SME scale will benefit from the small business funding boost. It has also raised concern over details and timings.
Perhaps the best way to interpret the reception of the news of the new SME lending scheme is one of an optimism tempered by experience. The extra small funding is certainly welcome but, with SMEs wary of banks, there is unlikely to be any celebrating just yet.
As to what the new small business lending scheme means for the alternative finance sector, it seems very unlikely to make a difference to this growing industry. The landscape of the SME finance sector has changed markedly in recent years as the likes of invoice discounting, factoring and asset finance have filled the void left by banks, becoming established market products in the process. Given the confidence in these SME lending facilities, another major shift looks very doubtful.
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