The Lloyds-driven boost in SME lending through the Funding for Lending scheme in Q1 is good news, but the real future of small business finance lies elsewhere: alternative finance.

At long last, the Funding for Lending scheme can celebrate an increase in SME lending; funding rose by £635 million during the first quarter of the year, compared with a £800 million decline in the last three months of 2014. According to the Bank of England, lending from Lloyds played a key role in the upturn; the bank has recently announced a multi-billion pound small business lending initiative.

However, it would be wrong to assume that economic recovery is ushering business owners back through the doors of traditional lenders. Indeed, other lenders to help turn around the performance of the Funding for Lending scheme included a major alternative finance company and a key challenger bank.

Tellingly, despite the news, the feeling remains that more has to be done to improve access to small business lending. Comments from the Asset Based Finance Association, urging the government to make details of all lenders more widely available and easier to access, underline this sentiment.

The role of alternative finance as a mainstream SME lending source is widely recognised and now recognition is growing that more needs to be done to increase business owners’ awareness of the services that are available to them, such as invoice finance, peer-to-peer lending and crowdsourcing. The reaction to the Funding for Lending news has reaffirmed this feeling and points to a major new stage in the development of the alternative finance sector.

We are seeing more and more alternative finance success stories – upmysport is one of the latest – and to ensure that this list continues to grow, the focus has to grow on educating SMEs about alternative finance.

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