New reports from Clydesdale and Yorkshire banks claim that 2014 will be the year of SME growth. This is positive news but how will this optimism be nurtured and the expansion funded?

It seems clear that optimism is continuing to grow among SMEs – according to the new data, 4.5 million SMEs (or 97% of those surveyed) said that they plan to expand in 2014. Most investment will be in new equipment and technology, new markets and new staff. It will mostly be medium-sized companies that target new markets, while small businesses will be focused on recruitment. Investment in new equipment and technology will be made across the board.

Furthermore, insurance company LV= has released a new report showing that entrepreneurs are thriving despite the tough conditions. According to the insurer, the number of entrepreneurial sole traders has reached 1.7 million, with annual turnover at over £150,000 in some cases.

So, where will the funding come from for the forecast growth? Traditional lenders? There has been some thawing of policies towards SME lending, but only some. Recent comments from the Federation of Master Builders highlight the on-going problems that SMEs face. The organisation has called for simpler finance schemes for small businesses: it claims that the sheer number of SME lending initiatives is a barrier to finance and, as such, the government is still failing to help businesses in the face of continued reluctance from banks with regard to SME lending.

Hence, invoice finance is set to play a key role in SME growth in the year ahead. The prolonged caution from traditional lenders and confusion over multiple SME lending schemes is why this easy-to-use, transparent and affordable service is flourishing and will continue to do so.

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