Lending figures for the last quarter of 2012 have highlighted the continued challenge in accessing SME finance, called into question the future of the Funding for Lending scheme and underlined the value of invoice finance.

News that lending fell by £2.4 billion in Q4 2012 has further dented confidence in the Funding for Lending scheme, which has been under growing pressure, in particular in terms of its failure to improve access to small business lending and reinvigorate SME finance.

Whether this latest development proves to be the straw that breaks the camel’s back for Vince Cable and triggers a major policy review from the Business Secretary remains to be seen, but as debate continues over whether the scheme has failed or whether it just requires more time, alternative finance, led by selective invoice discounting, continues to establish its credentials as a key source of SME lending.

New data from the British Bankers’ Association provides more evidence that the cautious attitude of traditional lenders remains a major barrier to SME finance, whether regarding start-up funding or for the maintenance of cash flow. The figures show a decline in small business lending to £1.5 billion in the last quarter of 2012, compared with £1.6 billion for the same period in 2011.

These figures also further highlight why alternative finance has evolved into a mainstream SME lending service in recent years. The sector has expanded markedly and, as the wheat has been separated from the chaff (including a crackdown on payday lenders), selective invoice discounting has emerged as a key SME finance product, providing companies with a flexible and transparent service.

The Funding for Lending scheme is likely to be given more time, but whatever the results, the impact and role of selective invoice discounting and other leading alternative finance products is clear to see.

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