CBI guide highlights alternative finance for SMEs

Posted on 20 May 2013

The CBI has launched a new alternative finance guide, urging SMEs to consider the broad range of finance options available to help them grow, including asset-based lending, equity investment and peer-to-peer lending.

The guide, Ripe for the picking, highlights research showing that high-growth medium-sized businesses could be worth up to an additional £20 billion to the economy by 2020.

A GE Capital report shows that SMEs plan to spend £51 billion over the next 12 months, but will need the right funding to realise their potential.

Katja Hall, CBI chief policy director, said: “Banks will continue to be a vital source of finance but it’s not a one-size-fits-all solution, and we’re encouraging growing firms to open their eyes to the broad range of funding options on the market.”

The CBI said that while UK banks are the source of nearly 80% of all credit to growing businesses, the financial crisis has put the UK on an irreversible path to a “new normal” in financing.

Regulatory reform, balance sheet restructuring and a more realistic pricing of risk mean that traditional bank debt will no longer be the right finance for all businesses in all occasions.

Hall continued: “Growing businesses could look to corporate venturing, for example, or to issue retail bonds, like Hotel Chocolat did with its innovative chocolate bonds.”

Look out for TM’s June issue, with its Finance Supplement on alternative/asset finance

Vince Cable, secretary of state for business, said: “Britain’s businesses cannot grow, export and innovate without proper access to bank credit. But they also need alternatives when looking for finance, as a traditional bank loan might not always be the answer.

“Government wants to see a shift in the market structure towards non-bank lending, and through the business bank is deploying £300 million of the £1 billion allocated to the initiative to invest alongside the private sector in new entrants and the growth of smaller lenders.”

The CBI alternative finance guide highlights some of the choices available, including: asset-based lending; supply chain finance; trade finance; peer-to-peer and crowd funding; retail bond market; self-issued retail bonds; private placements; business angels; venture capital; corporate venturing; Business Growth Fund; private equity; and public equity markets.

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