The Royal Bank of Scotland (RBS) has begun referring SME finance customers to Funding Circle and Assetz Capital. The move cements the mainstream status of alternative finance.

From late January, RBS has been recommending the two alternative finance providers to SME clients in appropriate cases. The change in strategy follows the Enterprise Guarantee Scheme mis-selling scandal and echoes a similar move by Santander in 2014. Also, the British Business Bank began lending through a peer-to-peer lending platform last year.

The decision by RBS, which accounts for one third of the small business lending market, underlines the increasingly important role that alternative finance services, such as invoice finance, peer-to-peer lending and crowdsourcing, are playing in improving access to capital for SMEs and nurturing steady sector growth.

Tellingly, Funding Circle has recently announced that its small business lending in the UK and USA has reached £500 million. The partnership with RBS should further accelerate that lending growth. This announcement comes not long after the Asset Based Finance Association revealed that the use of asset-based finance in the UK had reached record levels.

New SME lending data from the Bank of England show just how significant this shift in SME thinking is. According to the figures, bank lending to small businesses fell by £1 billion in December 2014, while lending to all companies declined by £3.8 billion. Data from the British Bankers Association underline the trend, with its figures showing a £2.4 billion decrease in business lending by major banks in the same month.

We are only just over a month into 2015 but as far as small business lending goes it is clear that alternative finance has a major part to play in driving not just sector growth but also wider economic revitalisation.

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