Alternative, Traditional SME Finance Spheres See Growth
The past few years have seen some of the largest changes in the history of small business lending, and that evolution hasn’t been stifled by borders. Across the globe this week, new small business lenders emerged, new data on SME lending rates surfaced and new initiatives to provide small business with access to capital launched — in both the traditional and alternative spheres.
$50 million in financing from the British Business Bank landed at Funding Circle, on the condition that the funds be used to finance SMEs, reports said this week. The investment by the BBB in the alternative lender signals support from the state-run bank for the industry overall, though the BBB is also working to introduce stricter requirements for firms like Funding Circle to protect both investors and borrowers. The latest investment round brings the total funds the BBB has provided to Funding Circle up to more than $122 million, reports said.
$4.7 million has been financed to startups via a new venture from InnoVen Capital, an India-based venture capital company that formed its Credit Assistance Program. The initiative aims to provide the startups within its portfolio with access to traditional financing so they do not have to rely on venture financing to seek funds. Members of the program include both traditional and non-bank players, like RBL Bank, Standard Chartered and Tata Capital, reports said. According to InnoVen Capital, its hand in helping startups seek a bank loan means banks feel more secure about financing such a young company.
60 minutes is all it takes for Barclays to approve of an SME loan, thanks to the launch of its newest small business lending service on the mobile app. The U.K. lender is now reportedly the first bank in the nation to offer nearly instant small business loans through a mobile app, positioning it in competition with alternative and marketplace lenders whose initial selling points were to offer a streamlined, online and accelerated small business lending process. Barclays is currently offering the new service to select SMEs with good credit and strong growth potential. But it has a ways to go: Research the bank conducted prior to the launch of the tool found that nearly a third of SMEs that agreed a loan would boost their business ultimately decided not to apply.
60% of SME invoices are paid late in the U.K., a statistic that Amicus Commercial Finance said reveals the need for small businesses not only to diligently manage cash but to access external financing when clients don’t pay up. According to Amicus’ latest research, existing payment agreements apparently aren’t long enough for suppliers’ clients: 16 percent of invoices remain unpaid after 90 days, and 7 percent go six months without getting settled. Medium-sized companies with between 40 and 249 employees were the worst effected, the report found.
1.67% fewer SME loans slid into delinquency last November, according to the most recent Thomson Reuters/PayNet Small Business Lending Index. The data revealed the first increase in SME lending in the U.S. in six months, with the change in delinquency rates marking the first decline in a year or so, reports said. The data reflected a bump in small business financing activity in November, suggesting the results of the presidential election may have improved SME optimism and economic outlook.
1 new SME lender enters China, thanks to certification from the China Banking Regulatory Commission. Reports this week said the CBRC has allowed Yilian Bank to begin lending to small and micro-sized companies. The bank was launched by Meituan-Dianping, an internet company that is now the first to have received dual licenses for small loans and private banking, reports noted. Yilian Bank will first focus on the restaurant industry, a space it said suffers from a lack of access to traditional financing.