UK Government Announces Plans To Offer Alternative Finance To SMEs.

Is your business struggling to access finance? Have your expansion plans been stymied by your bank’s unwillingness to lend?

If you’re one of the many SMEs who have had their plans stifled by a stubborn and risk-averse banking system, then there could be some good news on the horizon. The UK Government has confirmed that it intends to take the initiative. It is now planning to improve access to alternative finance for those small and medium-sized enterprises (SMEs) which have been turned down by funding by High Street banks, and that’s an initiative all accountants will applaud.

So what exactly is this new government initiative?

Well, the Government has confirmed that small firms that have been denied funding by the main lenders will soon be directed to alternative sources of finance, through government-approved financial lenders from the private sector. Is the Government intending to apply any controls and restraints on these new lenders? Well, the lenders will be required to pass a set of minimum standards to ensure that SMEs remain in control and are properly protected throughout the process.

So why has the Government decided it was necessary to act? Well, currently 80% of key banking relationships with British SMEs are controlled by the UK’s four largest High Street banks. The problem has been that evidence clearly demonstrates that 40% of small business owners simply give up their search for finance if they are unsuccessful in getting funding from the main banks.

Unfortunately, evidence shows that many of the smaller business rejected by the big four could have succeeded if only they had been able to access the finance they required. In fact, in a recent Government consultation, the authorities state that a proportion of SMEs turned away by the biggest UK lenders are regarded as viable businesses and are only rejected because they do not meet the risk profile of each individual bank. As a consequence, the market is failing small businesses as challenger banks and alternative finance lenders cannot provide a different avenue for SME owners as many simply aren’t aware of their existence. So the Government has now decided it was time to take action and make alternative finance available to SMEs.

The question most accountants and smaller businesses will want to know is what’s likely to happen next?

Well, the only information available at the moment is that the Government maintains that detailed regulation of the alternative finance process will be set out clearly in secondary legislation following the passage of the Small Business, Enterprise and Employment Bill later this parliament. Until then we’ll just have to sit back and wait.

If your SME is having difficulty raising finance, or struggling to find credit to fund expansion, then why not speak to Steven Glicher’s accountants? Our accountants can help your business raise finance and can give you expert advice on identifying the type of funding you need, finding the most suitable sources of finance, and calculating the cash-flow projections, budgets, and trading forecasts. For further information give us a call on 0161 485 8007, or email

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