The extension of the Funding for Lending scheme until 2018, because credit conditions for small businesses haven’t improved enough, underlines the essential role alternative finance is playing in SME finance.

The Funding for Lending scheme, now focused exclusively on small businesses, will continue until the end of January 2018. The scheme reported a £700 million increase in SME lending in Q3 2015, up 75% over the previous quarter. Notably, while an upturn in lending from Lloyds and the Royal Bank of Scotland (RBS) was the principal growth driver, the top performing lender below these two high-street stalwarts was challenger bank Aldermore, whose SME finance offer incorporates alternative finance services. New SME lending initiatives are likely to have been a key factor behind the surge in lending at Lloyds and the RBS.

The role played by Aldermore, plus the fact that credit conditions remain unsatisfactory for small businesses despite the efforts of the Funding for Lending scheme, underline just how important alternative finance has become to the SME sector in the UK.

New research on crowdfunding by AltFi, which focuses on the need for greater awareness, illustrates the pace at which this service is growing. According to the study, the amount of money crowdfunded by SMEs is set to reach £140 million in 2015, with over 80% of companies that crowdfunded between 2011 and 2014 still trading. In addition, while crowdfunding remains retailer industry centric, more and more sectors are making use of the facility, including energy, healthcare, technology, financials, media and utilities.

In the last few weeks, experts have given notice that the UK faces a multi-billion small business funding black hole if more isn’t done to raise awareness of alternative finance services. The latest news from the Funding for Lending scheme and the decision to extend it only reinforces this argument.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.