The latest Bank of England report on SME credit conditions suggests that alternative finance is no longer the alternative choice for small businesses, but the primary option for accessing finance.

2014 is only a matter of days old but it seems clear that it will be the year of invoice finance, peer-to-peer lending, crowdsourcing, etc. Bank of England figures show that demand for SME finance from high-street banks was flat in the last quarter of 2013, a period during which, according to the banks at least, credit was more readily available than ever.

That invoice finance and other forms of alternative finance should be occupying such a position will come as little surprise to small businesses that endured a year where key government funding initiatives came up short in terms of small business lending while achieving success in other lending areas.

The rising profile and prominence of alternative finance products were regularly discussed last year and these new data confirm much of what has been said. The attraction of transparent, flexible and affordable SME finance products such as invoice finance or peer-to-peer lending to companies looking for start-up funding or to raise capital to maintain cashflow is there for all to see.

However, SMEs shouldn’t write off bank business lending: using services from both sectors in tandem can often provide the best results. Another key benefit of invoice finance, etc. is the ability to use them in correlation with traditional SME finance services.

Furthermore, the high-street banks will surely respond to the rise in competition and continued pressure from the government, which should benefit small businesses.

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