The Employment Allowance, which came into effect at the beginning of April, will help support SME growth, but improving access to business lending remains a work in progress. The role of alternative finance is vital.

The introduction of the Employment Allowance, which can allow employers to save up to £2,000 a year on National Insurance contributions, is good news but it shouldn’t take the focus away from the improvement that is still required in SME finance. The state of the small business finance landscape has been outlined in a recent report by Department of Business entrepreneur-in-residence Laurence Tomlinson.

At the same time, the role of non-bank finance, including services such as invoice finance and peer-to-peer lending, is set to grow even bigger, with pressure growing on the government to force banks to provide companies they have rejected with details of alternative SME lenders. New data that shows £787 million in business loans were rejected in the third quarter of 2013 underlines the scale of the demand for SME finance that is going unfulfilled, and the Alternative Business Funding group is putting its weight behind this proposal.

How the government responds to this lobbying remains to be seen. While it has made some encouraging noises with regard to the role of non-bank finance, there was little concrete action in the 2014 Budget. In the wake of Tomlinson’s recent remarks on traditional SME lending and its desire to see small and medium-sized companies play a key part in driving economic growth, more affirmative action in this area seems an absolute must.

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