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Opinion on the British Business Bank

Anil Stocker, head of policy of the Next Generation Finance Consortium (NGFC) and co-founder and director of Marketinvoice.com, shares his views on Vince Cable’s announcement of a British Business Bank.

This week the Business Secretary Vince Cable announced at the Liberal Democrat Party conference that the Government would be committing to the new British Business Bank, an institution designed to improve the options for small and medium sized enterprise (SME) funding. The Treasury has already given the plan the go ahead, setting aside £1 billion of taxpayers’ money. Further stressing the importance of their scheme, Chief Secretary to the Treasury, Danny Alexander said that the plan for the £1bn state-backed business bank was “top priority” and would be sped through the legislative procedure in the same way emergency requests for military equipment are processed.

By aiming to channel funds to SMEs from the new business bank through alternative finance platforms, the Government has shown laudable commitment to encouraging SME growth. Small businesses are the key to economic progress; 60% of the UK workforce and nearly half the UK’s GDP is accounted for by SMEs. At the Next Generation Finance Consortium (NGFC) we welcome the competition that will be created in the lending sector by the Government’s new business bank. For too long UK SMEs have had only one option when it came to finance. Given that bank lending to businesses has shrunk by 17% over the past four years, and in the months to May lending collapsed by £3 billion, their current position has become untenable.

The NGFC would like to see more details on how the alternative finance platforms will actually be used by the bank, but for the moment this is very encouraging and highlights the importance of our funding sector. The role of the Business Bank should be to provide support to both challenger banks and alternative finance institutions like the members of the NGFC, and also to educate business-owners about the financial options they have. We need to see more of this, rather than Government schemes loaning money to high street banks to stimulate business lending. According to recent research the majority of growing businesses rely on bank overdrafts or personal funds to finance their business. Most shocking of all is that companies are delaying payments to suppliers and calling on friends and family rather than making use of formal alternative sources of finance. This needs to be rectified, by making SMEs aware of the funding options out there like credit unions and invoice financiers, the lending market will become more competitive and thus will be better in driving business growth.

The NGFC represents a union of these alternative finance institutions, including community development finance institutions that the CDFA represents (Community Development Finance Association), crowd-funders like Crowdcube, peer-to-peer lenders like Funding Circle and the online invoice finance company MarketInvoice. The initiative was founded to promote awareness of alternative finance, and is led by Anil Stocker of MarketInvoice.

This was posted in Bdaily's Members' News section by Anil Stocker .