This premise is born out by the facts: the average value of
traditional forms of funding supplied to businesses fell by 5% over the last
year. Net traditional funding to businesses is now down by almost £100 billion
since 2009/10, falling 19% from £485 billion to £391 billion. The message is
clear for those who choose to listen.
The ‘plus’ side to the apparent lack of appetite from the
high street is that it has given greater impetus to the rise of alternative
lenders, developing more flexible and more imaginative asset-based finance
‘products’ that are helping SMEs find the finance they need to grow.
Crowd funding and peer-to-peer lending from the likes of
Market Invoice and Platform Black are fast becoming de riguer, and specialists
like Nucleus Commercial Finance are being more creative still, with a specific
product within the cash-starved construction sector developed in conjunction
with quantity surveyors who understand the intricacies of building contracts.
It means that a business does not have to wait to be paid; the company gets the
money as soon as it raises an invoice and all concerns about paying staff and
costs are removed.
The only thing that is now preventing the wider take up of
such ‘products’ is a lack of understanding of the asset based finance sector
brought about, at least in part, by a lack of sufficient publicity. But whilst
the focus of those advocates of alternative lending is around business growth,
such growth requires a stable platform on which to build, and that requires an
environment where the issue of late payment is properly addressed.
The latest research from Bacs shows that the late payment
debt burden shouldered by UK businesses has reached £46.1 billion, of which the
vast majority (£39.4 billion) is owed to SMEs. Sixty percent of UK SMEs are now
experiencing late payments, with the average SME owed more than £38,000. One in
four say that if the amount they are owed grew to more than £50,000 it would be
enough to send them into bankruptcy.
Avoiding such an outcome requires a combination of sound
credit management and a ready availability of cash. In the last 12 months,
alternative lenders have been able to make available some £17.5 billion of
funds, and the numbers are growing. The use of asset-based finance today
appears to far outstrip its usage at the height of the recession, a claim that
is far from anecdotal. Touch Financial, a leading independent commercial
finance broker, has seen this first hand and noted a marked increase in the
number of applications for asset-based finance over the last three years, and
from a diverse range of sectors, from construction and recruitment, through to
IT and logistics.
While the increased awareness of the benefits of asset-based
finance is an encouraging start, it does not go nearly far enough. The message
needs to be broadcast loud and clear: if Business Britain is going to continue
its recent signs of economic recovery, SMEs need to look beyond the high street
and look at viable alternatives to secure their future growth.