"Financing projects from £50,000 to £100 million"

CBI demonstrates alternative sources of finance for businesses

CBI demonstrates alternative sources of finance for businesses

A new guide from the Confederation of British Industry (CBI) suggests that small UK businesses should seriously consider alternative sources of credit.

Its new guide on business funding, ‘Ripe for the Picking’, says that businesses could benefit from numerous alternative sources of finance.

It listed peer-to-peer lending, crowdfunding, trade finance, venture capital, and equity markets among the options available beyond high-street banks.

Though banks currently provide around 80% of all lending to SMEs, many small businesses have expressed their frustration at the lack of access to finance.

The report noted that a broader choice of lenders was helping to address this issue, with Aldermore Bank and Metro Bank lending £251 million and £53 million respectively in the final three months of 2012.

It also highlighted schemes such as the Business Growth Fund, which was set up as an independent company in 2010 and has capital worth up to £2.5 billion to invest in eligible businesses.

In his latest Budget, Chancellor George Osborne said that an extension to the Funding for Lending Scheme would be weighted towards small businesses and away from residential mortgages, where it has driven rates down to record low levels.

Peer-to-peer lending platforms, which introduce lenders to borrowers, have become increasingly confident in their ability to meet the lending shortfall to small businesses.

A recent study by Nesta, an innovation charity, estimates that sites such as Funding Circle could provide as much as £12 billion in loans if they absorb the full demand from small businesses (read more).

Meanwhile, crowdfunding platforms, such as FundTheGap allow businesses to showcase themselves and raise capital while allowing investors to benefit from tax reliefs.

Business Secretary, Vince Cable, said that the CBI’s guide would help to raise awareness of the different options available to firms, and how these spur competition rather than just availability in the market for credit.

"Britain's businesses cannot grow, export and innovate without proper access to bank credit. But they also need alternatives when looking for finance," he said.

"The government wants to see a shift in the market structure towards non-bank lending."

Tuesday, 21 May 2013 13:47
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