In committing a further £50 million to supporting SME finance in the UK, the British Business Bank has further underlined the role of alternative finance.

The Bank is investing the money in a new European fund and the move follows the Chancellor’s decision to make a further £100 million available to the institution, whose aim is to facilitate up to £1 billion in new lending to SMEs through peer-to-peer lending, challenger banks and other providers. In addition, the Bank also recently decided to make £10 million in small business lending available exclusively through peer-to-peer lender RateSetter.

A new proposal from the government that banks would have to provide access to non-bank finance to businesses to which they couldn’t offer finance further illustrates the importance of alternative finance services such as invoice finance and peer-to-peer lending. Businesses no longer have to rely on traditional lenders for finance.

While banks remain the primary source of credit for small businesses, the mindset of these companies is changing, with non-bank finance becoming increasingly popular. New data from the National Association of Commercial Finance Brokers (NACFB) underlines this trend: according to the NACFB, small business lending through the organisation increased by 20% to £12.7 billion in 2014.

With the Asset Based Finance Association reporting a record amount of borrowing through its asset-based lenders, the rise and rise of non-bank finance is clear.

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