Small business finance: Sowing the seeds of change


Now that summer has finally shown its face – at least for a day or two! – and the school gates have closed for the long break, there will be plenty of people heading off on holiday, making the most of the chance to relax with a cool drink in one hand, a book in the other.

I realise that most of you will probably opt for a slightly more mainstream publication than the latest release from the Centre for the Study of Financial Innovation but I, for one, have enjoyed dipping into it over the last week of so since its launch.

The book, Seeds of Change: Emerging sources of non-bank funding for Britain’s SMEs is written by Andy Davis, the former editor of the weekend FT, and the 2012 winner of the Wincott award for his work on personal finance for Prospect.

Its launch could not have been more timely.  With UK banks in the thralls of yet another scandal, this time over LIBOR rigging, the thought of a future financial system that is more efficient, more transparent and more able to deliver the business loans that small businesses need to grow, is more than welcome.

The report was born out of an acknowledgment that banks “are no longer meeting the funding needs of businesses, particular small ones.  The scale of the funding gap is huge, with estimates of £29bn to £59bn cited for small business funding alone.”

In his introduction to the report, Alasdair Steele, Head of the Financial Sector Group, Nabarro LLP, went on to conclude, “One thing is clear, banking lending to small business is not set to increase significantly in the near future – alternatives are required.”

And that’s precisely why it’s time for new finance – initiatives such as peer to business lending – to start healing the pain of the past five years.  It’s no longer about bank bashing or blaming banks for scaling back lending to small businesses.  The banks have little choice and, after all, it’s in everyone’s interests to have better capitalised banks.

No, it’s no longer the time for looking back.  Instead, we need to cast our sights forward, and concentrate on imagining a brighter future for business finance… and that’s precisely why reports such as this one are so important.

Seeds of Change looks at a variety of financial innovations, not simply the growth of peer to peer and peer to business lending.

Infact, there wasn’t a shortage of innovation to report on at all, and that, says Colin Tyler, the Chief Executive of The Association of Corporate Treasurers, is one small positive to draw from all the turmoil.  “Even the storm clouds of the continuing financial crisis have a small silver lining – the general shortage of banking funding for business has been a great spur to innovation and diversification of funding sources.”

Yes, these are exciting times.  These are times in which focusing on positive change is far better than reliving the mistakes of the past.  Yes, there is much work to be done to spark growing business investment.  Yes, there is a lot of ground to cover before savers can get a better return on their money and yes, there is a long way to go before both the demand and supply of business funding provide the boost our economy needs for recovery… but peer to business lending is a start.

It’s sowing the seeds of change, and the seeds are falling on fertile ground, ripe for rapid growth.

There will be problems along the way, undoubtedly.  There will be success stories and failures, there will be losses and gains and, at the end of the day, some people will have their fingers burned, but as the director of the CSFI, Andrew Hilton, says, perhaps “it is better that they get burned investing in UK plc than blowing the egg money on Betfred or”

It’s time to look to the future and start making a brighter future for savers and borrowers, a brighter future for us all.


One thought on “Small business finance: Sowing the seeds of change

  1. Pingback: Bank of Dave… helping the seeds of change to take root in small business funding | FundingKnight: The Blog

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