Small Business Banking to Become More Expensive?

Financing Britain's Growth: ThinkTank whitepaperA report published by invoice finance provider Venture Finance has suggested that small business banking may have to become more expensive in order for SMEs to better access finance.

The white paper, Financing Britain’s Growth (PDF), drawn up in conjunction with the Department for Business, Innovation & Skills (BIS), KPMG, the British Business Angels Association (BBAA) and a number of successful SMEs, suggests that reliability of funding is the key to encouraging small business to find increased confidence and stimulate demand for business lending.

Speaking to The Telegraph, Managing Director of Venture Finance, Peter Ewan, cited the banks attempts to cut prices prior to the financial crisis resulted in a drop in service quality:

“I hope pricing is increased, allowing financial institutions to give a better service to their clients.”

“As fees have been driven down it is much more difficult for financial institutions to understand their clients, because they have less people to do so. They have to be more efficient because prices dropped.”

Apart from the fall in service quality the report also identified other challenges facing Britain’s small businesses including a reluctance for SMEs to take on more debt, cashflow management problems stemming from increased credit periods and chasing late payments and the increased risk of insolvency arising from deferred tax debts.

It’s not all doom and gloom though as the whitepaper seeks solutions to ease small business lending by insisting that lenders "raise the bar" and become more innovative with their offerings, that the country’s small businesses are seeking increasingly flexible finance deals to suit their business needs and that reliability and quality of service are more important factors than price when it comes to small business banking.

Further details are in the ThinkTank whitepaper Financing Britain’s Growth (PDF) and for business advice on the subject read how Invoice Finance eases Cashflow and fuels Business Growth.

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