Anil Stocker, Co-Founder and Director of MarketInvoice comments on the credit easing plans announced
Anil Stocker, Co-Founder and Director of MarketInvoice comments on the credit easing plans announced in today’s Autumn Statement by Chancellor George Osborne:
“The National Loan Guarantee Scheme that has been unveiled today should be commended for its aspiration to reduce the cost of finance for small and medium-sized companies (SMEs). It is however the latest in a long line of Government interventions in a banking sector that seems to struggle to extend finance to SMEs.
“This scheme shows the Government is still relying on banks to originate and distribute SME loans, something they have struggled to do effectively under either Project Merlin or the Enterprise Finance Guarantee Scheme. Today’s announcement essentially gives the banks another chance to prove that they have the infrastructure, expertise, and motivation to lend to SMEs. If you talk to small business owners about their experience with the Enterprise Finance Guarantee, many applications were still turned down and it was very difficult and laborious to obtain the loans. It will therefore be interesting to see what kind of hoops the banks will force SMEs to jump through to obtain the loans that have been outlined today.
“More broadly however, and with a predicted fall in growth for next year, there do not seem to be any tangible demands on the banks to lend to SMEs. When this scheme expires in two years time, you have to wonder if we will be faced with the same problems that we are facing now. Government underwriting of small business loans is not sustainable in the long-run and viable private sector alternatives should be encouraged. Over time, these new solutions will be the only way to solve the lack of SME credit available, and the Government should be careful not to crowd out current innovation going on in the SME funding market.
“MarketInvoice presents a solution to SME funding problems, by offering businesses the opportunity to auction their invoices due from large corporate debtors to a network of investors in real time, without any hidden fees, onerous collateral or lengthy contracts. SMEs can obtain up to 90% of their invoices upfront from investors who compete between them to provide SMEs with the lowest cost of finance. Our customers tend to be service or wholesale companies with revenues between £500,000 and £20,000,000 and include both startups and well-established businesses. Having launched in February 2011, MarketInvoice is already helping 45 small businesses and has channelled nearly £3 million to a wide range of British SMEs. (www.marketinvoice.com)”