UK SMEs Urged to Seek Alternative Funding Sources
The UK’s high-growth, small to medium-sized enterprises (SMEs) could be worth an additional £20bn to the British economy over the next seven years if they can gain access to finance through alternative channels, according to the Confederation of British Industry (CBI).
The business lobbying organisation, which has issued a guide to alternative sources of financing, notes that bank funding for SMEs has been in decline in the wake of the 2008 global banking crisis, which has made traditional lenders more cautious and, according to a recent UK study, created a cash-flow crisis that is stifling small firms.
“A thriving SME sector is critical for maximising the UK’s growth potential and access to finance is fundamental to enabling businesses to realise their growth ambitions,” the report notes.
“These firms could be worth an additional £20bn to the economy by 2020, but only if they can access the finance they need to grow.”
The CBI suggests that an increased use of asset-based lending methods such as invoice financing, supply chain finance (SCF), trade finance, retail bonds and peer-to-peer lending could all be used to ease the strain on SMEs. In addition more innovative approaches such as online ‘crowd-funding’ platforms, which enable individuals and businesses to back specific projects, could also be explored.
UK business secretary, Vince Cable, echoed the CBI’s call for British firms to seek funding outside the banking sector.
“Britain’s businesses cannot grow, export and innovate without proper access to bank credit. But they also need alternatives when looking for finance,” Cable said. “The government wants to see a shift in the market structure towards non-bank lending.”