The last 18 months have witnessed a proliferation of alternative SME finance services as banks have remained cautious over small business lending. With more choice comes the need for quality control and news regarding payday loans underlines the role of invoice discounting.

Back in the summer, the Centre for the Study of Financial Innovation (CSFI) published a report identifying dozens of alternatives to bank SME lending, including invoice discounting, crowd sourcing, retail bond schemes, peer-to-peer lending and short-term payday loans, that small businesses were using, often in tandem with bank services, to both generate start-up funding and maintain cash flow.

A few months later and focus is beginning to fall on the need to separate the wheat from the chaff and it would seem that the Office of Fair Trading is taking up the mantle. The office has fired a warning shot across the bow of 240 payday lenders, highlighting key concerns, and it has also opened formal investigations into some of these companies.

At a time when small business owners are increasingly dependent on alternative finance and, as a recent study at the University of Surrey suggests, are increasingly bound to one type of finance, it is important that alternative SME lending is carried out responsibly. Payday lender interest rates can be as much as 4,214% APR.

Select invoice discounting is a transparent SME finance service: only a single charge is levied on the amount advanced and it comes with no long-term commitment – companies can use the service on an invoice-by-invoice basis. As a result, invoice discounting is driving alternative SME sector growth and has been mentioned in relation to the development of the British business bank.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.