The future of SME finance in the UK has becoming increasingly focused on the launch of the British Business Bank, but growing concern over its mandate and resources underline the importance of invoice finance and other alternative finance products.

The Institute of Chartered Accountants in England and Wales (ICAEW) has questioned the recently published proposals concerning the British Business Bank, while the British Chambers of Commerce (BCC) have also taken issue with some of the details released last week.

The ICAEW has voiced fears that the bank will do little to change the SME finance status quo – acting to merely consolidate existing schemes – and the BCC have questioned the amount of capital the bank will make available. It believes that ten times the stated figure of £1 billion is required for the institution to have a meaningful impact.

While it is far too early to write off the bank, which has the potential to rejuvenate the SME finance market, among traditional lenders at least, the recent comments from the ICAEW and BCC emphasise how vital invoice finance and other alternative finance have become to SMEs in the UK looking to generate start-up funding or maintain cashflow.

Tellingly, all eyes will be on how large a role alternative finance has to play in the operation of the new bank, which isn’t due to open its doors until autumn next year. Its inclusion has long been speculated upon and the extension of the Funding for Lending scheme earlier in the year to include some alternative finance services has only fuelled expectations.

The ICAEW aired a particular concern that the smallest businesses would be overlooked – the use of third-party finance would help address the need to provide finance across the SME spectrum. In the meantime, invoice finance goes from strength to strength.

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