You really do get the feeling these days that businesses, both large and small, have been back-peddling over recent years, due to the ravages of the recession and the prolonged agony of coming through the other side. But now the subject of SME lending is coming under more scrutiny than ever before, because it is acknowledged that the future success of the many thousands of companies in this sector is crucial to the survival of commerce and industry as a whole.
The government has admitted that the banks have been at fault in their recent attitudes to lending. The Business Secretary, Vince Cable, has himself stated that “Businesses across the UK are still unhappy with the way they have been treated by banks”. And John Cridland, Director General of the CBI, has said that “The current constraints on bank lending mean there is an urgent need to find alternative sources of capital suitable for growing businesses”.
Despite recent pontificating by the government about the way forward being through emerging innovations such as ‘bonds’ and ‘peer-to-peer lending’, there’s a call for SMEs in particular to take advantage of the fact that there is a much wider commercial finance industry at large – and they are ready and willing to help growing businesses.
Industry pundits reckon that the future of SME funding will have very little to do with the government or any task force, fund or initiative that it launches. They say that the future is in the hands of the businesses themselves, together with the advisers that guide them. In fact, 65% of small business owners think they will have to seek alternatives to bank finance in order to fund their enterprises in 2012.
Because of the volatility of the market, combined with the Euro crisis, there’s a lot of uncertainty surrounding economic growth. Some people though think that many companies are better prepared than they were in the past because they’ve been drawing in the purse strings for so long now. Receivables finance is one area of funding that is tipped to dramatically increase in size over coming years to help the situation.
So next time the bank responds to your request with a big fat negative, or delivers so many constraints and caveats that you wonder why you bothered talking to them in the first place, consider alternative avenues of funding. We believe that equipment leasing can be an effective way to start the process.
SMEs are rightly regarded as the backbone of the economy, and they rely heavily on financing for their future prosperity. We must ensure that the fragile climate for High Street lending doesn’t hinder their progress.
