After the recession in 2008, small businesses took a hit with reduced sales and decreased funding, which resulted in a dip in business confidence. With the financial market slowly recovering, it would be assumed that lending rates to SMEs would also be on the up. However, recent figures released by the Bank of England paint a different picture with bank’s lending to businesses shrinking in comparison to the previous year. The knock on effect to this is a continuation of negative attitudes, and a lot of lost hope from SMEs looking to grow and expand their company. The reality is that banks are only one part of the financial lending picture – SME lending comes in multiple packages. There are more funders out there willing to lend – a fact that the majority of SMEs are completely unaware of. While banks will always have a big role to play in the financial lending market, they are starting to face serious competition from alternative lenders as the lending landscape continues to diversify. The alternative finance market is rapidly expanding with a variety of non-traditional forms of lending emerging. Lending options such as pension-fed funding is very specialist, but has a great place in the market. Similarly, P2P and crowdfunding are proving to be popular options, but as very new players they have some growing to do before they can compete with other, more established forms of lending. So, with a lot of new options on the horizon, what problems will SMEs face when it comes to securing finance in the future? The issue isn’t and won’t be about availability of finance – the number of lenders that are willing and able to lend to credit-worthy businesses is set to continue to rise. The problem for businesses is not knowing the range of options on offer to them. Without the awareness of the alternative options available, credit-worthy SMEs who get rejected by high street banks will find themselves at a standstill, unable to grow and expand. Looking beyond the high street banks for funding is a crucial step that businesses need to consider when looking to borrow in the future. To continue rebuilding business confidence and cater to a growing number of firms in the UK, the Government is currently working on a consultation process for SME lending. This will set a standardised referral process from high street banks to brokers to ensure that credit-worthy businesses don’t miss out on securing funding. The future of lending is full of opportunities for SMEs, and by raising the awareness of the full range of options available, more and more businesses will be able to capitalise on the financial support on offer. Adam Tyler is CEO of the National Association of Financial Commercial Brokers (NACFB) and a key consultant to the Department of Business, Innovation and Skills in the creation of an official referrals process for SME lending. The NACFB recently launched findSMEfinance, which matches businesses with brokers.
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