Serious growth needs serious business lending

The UK is officially out of recession. But a spike in GDP will remain just that – a blip – unless business can get hold of more finance.

Duncan Kreeger
30th October 2012
Duncan Kreeger - West One Loans
In the same week as we’ve seen quarterly growth of 1%, research by the Cambridge and Counties Bank highlights the dire state of business lending. Every day, three hundred loan applications from smaller businesses are rejected by high street banks.

That’s in stark contrast to the alternative lending sector. In our latest West One Bridging Index, released today, we’ve seen another quarter of growth. Total industry gross lending grew by 14% in just a quarter, to hit £399m in the three months to October.

What’s even more impressive is that 18% of this lending now goes to businesses, up from 14% only three months ago.

Alternative finance is a rare economic success story of the last half decade. The failure of the traditional banking system is a huge opportunity, as borrowers have seen the fundamental limitations of high street banks, which are reliant on credit markets and inflexible decision making.

Funding for Lending isn’t changing this noticeably, for all the hype we’ve seen. Since traditional high-street banks aren’t showing much real initiative of their own either. Anyone with a feasible business plan is turning elsewhere if they can.

That’s where a better investment model comes in. Cutting out layers between the investor and the borrower saves money. Short term finance can rapidly get projects off the ground this way.

And the movement to more imaginative funding models is growing beyond just the immediate gap thrown up by the credit crunch.

Borrowers are seriously reassessing how inefficient financial institutions have been in the past. Now that a recovery might just be in the pipeline, short term finance is still growing. When banks start competing again for commercial customers they’ve rejected, they might find that those old customers are no longer interested.
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