It has been revealed that non-banks are lending more and more to small businesses, with current levels at their highest for five years.

More small businesses are looking for alternatives to banks; therefore, alternative credit sources have become popular – in particular invoice financing and peer-to-peer lending.  Recent trends have shown that traditional forms of lending such as banks are still declining.

Commercial finance brokers have already arranged more than £10.5 billion of credit in the last year for SMEs.  This represents an annual increase of 17%.  Asset-based lenders have also seen lending increase to £17.4 billion – an increase of 10%.

This data has been gathered from industry associations and it clearly shows the shift from traditional lending.  The chief executive of the National Association of Commercial Finance Brokers, Adam Tyler, has stated that credit conditions in general have eased a great deal but mainstream lenders are still reluctant to offer finance to small- and medium-sized businesses.

The alternative sources of finance have been a lifeline for some businesses and a continuation of this will be necessary to help the economy to get back on its feet.  The organisation will be meeting with MPs to discuss the use of alternative sources of finance for businesses.

A spokesperson from the British Bankers’ Association said that traditional finance is not always the best option for some companies.  It has been pointed out that awareness of alternative sources of funding is not always high amongst small businesses.  Finance brokers are happy with the current rises, but they are still short of the £19.7 billion arranged in the 2006/7 financial year.

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