Invoice discounting is the answer to Funding for Lending frustration
Small businesses won’t need reminding, but new Bank of England SME lending figures have underlined just how tough access to finance remains for such companies, and with new figures confirming another rise in asset-finance use, just how vital a role invoice discounting is playing.
Hot on the heels of its Trends in Lending report, which highlighted the continued difficulties faced in securing SME credit, new Bank of England business lending figures show just how slow the rate of progress is in improving the availability of small business lending, in terms of the provision of both start-up funding and capital for companies to maintain cash flow.
According to the Bank, business lending fell by £2.1 billion in December 2012 and net lending over the year contracted by £18.7 billion. In addition, the average interest rate for business loans under £1 million increased from 3.39% in November 2012 to 3.65% in December.
Such figures reflect poorly on the Funding for Lending scheme, although the Bank has commented that the scheme should be given more time before its ability to improve access to SME finance is judged because the small business lending process takes longer than that for mortgage loans (an area in which it is having a positive impact).
Tellingly, figures from the Finance & Leasing Association show continued growth in the popularity of asset-based finance, a trend that emphasises the importance of alternative finance to small businesses, whether products such as invoice discounting and factoring are used on their own or in tandem with traditional SME lending services.
According to the association, asset finance worth almost £22 billion was used in the year to November 2012, a 3% increase over the previous year. Plant, machinery and IT equipment finance were key growth drivers. It is clear that asset finance, and alternative finance in general, is being increasingly used as a tool to drive business growth.
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