Will it be easier to access business finance in 2016?

Small business owners have had a tough time securing business finance since the banking downturn started to bite in 2008. However, the latest figures suggest that Government measures, designed to encourage banks to be more generous with their lending, are starting to bear fruit. £700m funding was lent to small business owners during Q3 – representing a 75% increase on Q2.

This is thanks to the national Funding for Lending Scheme, which has been in place since 2012. The policy, updated in 2014 to focus squarely on SMEs, involved money being given cheaply by the Bank of England to commercial banks in order to encourage lending and boost the economy.

To date, banks and building societies have drawn down £63.6bn, with a net figure after repayments of £26.2bn. The success of Q3 has been attributed to lending by Lloyds and Royal Bank of Scotland, lending £313m and £276m respectively.

Recently opened retail bank Aldermore increased lending by £85m, while building society Nationwide contracted farthest, reducing lending by £216m. In total, the net lending total for Q3 was £400m more than in Q2.

The lending deficit led to the inception of some unconventional yet wholly feasible funding models that may also be right for your business, such as peer-to-peer lending through bodies like Funding Circle, which targets small business owners and freelancers.

All this could mean a continuation into easier business finance in 2016. But, if a lesson is to be learnt from the banking crash, business owners should question whether they need to take on debt to fund operations, or whether to forgo interest repayments and manage to grow organically.

If you’re a small business owner looking for accounting advice, why not get in touch with our expert team today?