How are SMEs Getting Finance? Aldermore present the solution as they gain a competitive foothold

SMEs continue to have issues acquiring loan finance from banks. Now tired of receiving the cold shoulder from the UK’s largest banking institutions they are beginning to seek finance via other sources and means.

Invoice financing is now in vogue. It’s used to free up cash and working capital by borrowing against the business’s unpaid invoices.

Aldermore, the new British bank, says that the number of SMEs using invoice financing is soaring as small companies look for new ways to deal with the SME funding crisis.

British lenders are this week expected to continue to announce profits in spite of concerns over levels of lending to SMEs.

HSBC Holdings announced £7bn in profit for the first half of 2010 yesterday, with about a billion of this coming from its UK operations. They boldly announced that they intend to increase the pay and bonuses given to their staff, though one can only suppose who may receive them in actuality.
HSBC also admitted that despite their mammoth windfall as the UK climbs out of the recession they are have not increased overall lending to firms in the past 12 months.

Business loan applications are down 20% in the first half of 2010 and the stock of outstanding loans to SMEs was fractionally down because many core customers to HSBC are paying down debt.

Aldermore says that small businesses are increasingly frustrated with the inability of some of the big UK banks to meet their demands for funding.

The banks could be missing a trick as invoice generation is a sure indication that the firms in question remain viable.

Ian Wilkins, Managing Director at Aldermore’s invoice finance arm, comments:

“Some SMEs want to create some headroom in case of a fall in orders or a possible double-dip. Other businesses want to release cash to fund expansion.”

“They all realise that they will not be able to rely on their bank to give them the kind of overdraft facility that they have used in the past. Banks have to reserve capital against overdraft facilities even if they are not being used.”

“Small companies remember the lessons of the last recession and they are keen not to be let down at a crucial time by their bank.”

“I would love to say that the surge in invoice finance business that we are seeing is entirely down to our own efforts but we are definitely helped by the fact that other banks are giving SMEs the cold shoulder.”

Adapted from Source : http://www.smeweb.com/finance/news/how-are-smes-getting-finance-081003.html