Banks fall short of lending to SME’s

The latest figures published by the Bank of England have revealed that Britain’s biggest banks fell just short of their lending target to small businesses during the first half of 2011. This is despite the Project Merlin initiative, which had widespread support across the political and economic spectrum.

Given the context of ongoing negative press about the lack of availability of funding, it is essential that SMEs do not feel that they have run out of funding options. Access to finance need not be problematic, provided business owners and managers know where to look for funding and are prepared to consider alternatives to an overdraft in order to improve their cash flow.

The climate means that there is significant cash flow pressure on most businesses and, under such circumstances, it is hard to look beyond familiar finance facilities. However, looking at other more suitable and viable options is the key to ensuring sustainability and future growth. Over-reliance on bank finance or any single form of finance creates a risk.

The fact is the tighter the cash flow, the weaker the business in terms of lending criteria, making the task of securing finance even more challenging. It’s therefore imperative to act in a timely manner and ensure your business has access to the best possible facilities and can ride the ongoing waves of these challenging economic times.

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The most beneficial aspect of alternative funding solutions is the flexibility offered, as facilities can be specifically tailored to small businesses’ individual needs. For instance, asset based lending facilities such as invoice finance grow in line with turnover and can be adapted to fit a range of requirements through elements such as debtor protection and dedicated sales ledger management. We would therefore urge SMEs to look into the full range of funding options to maximise their chances of gaining adequate and appropriate funding on a timely basis. Put simply, cash flow doesn’t begin and end with a bank overdraft.