The SME finance landscape has changed significantly in the last decade, but there is still more redrawing to be done. Alternative finance has to have a bigger role.

The rise of alternative finance since the 2008 financial crisis has been considerable, fuelled largely by traditional lender caution towards SME lending. Almost ten years later, non-bank finance is very much part of the small business funding picture – peer-to-peer lending, crowdfunding and invoice finance have all made a name for themselves.

However, the redrawing of the small business lending landscape is far from done. Yes, alternative finance has become established but the fact that it is still referred to as “alternative” illustrates why SME finance needs more upheaval.

The purpose behind and rhetoric surrounding the Bank Referral Scheme, which is aimed at improving access to finance, in particular to alternative finance, is a case in point. There is a great need for more long-term thinking: this article sums it up nicely.

Critically, nearly a decade on from the worst economic crisis since the Great Depression, and in the wake of countless initiatives to improve access to capital, over two thirds of small business owners still list securing funding as their biggest challenge.

Tellingly, a new report from Hitachi Capital shows that SME trust in traditional lenders remains low. According to the study, only 15% of small business owners said that they completely trust traditional lenders, while over a third said that they tried to avoid borrowing money at all costs. Worryingly, 80% claimed to have ploughed personal savings into their business.

It is clear that the shake-up of the SME finance sector is incomplete and that more action is required if small business owners are going to be able to achieve the growth that the government views as essential to wider economic revitalisation.

Growth can only come from a solid financial base and for small business owners this means managing a range of costs, including those related pension auto-enrolment, cybersecurity, late payment and living wage and apprenticeship scheme reform.

Then there is the impact of Brexit. According to the new Citibase Confidence Index, small business confidence in the government to deliver a good Brexit deal is faltering. Almost a quarter of the small business owners questioned said that Brexit had had a negative impact on revenue.

With the market still hamstrung by uncertainty, it is vital that small business owners have the tools to steer their companies in the right direction. This is why recognising non-bank finance as a mainstream product and raising awareness of the services available is so important. This is the shake-up that still needs to happen.

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