Building society’s backtrack on SME funding further indicates the need for alternative funding for small businesses

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Small business finance firm Merchant Cash Express, which offers the product Business Cash Advance, says the failure of high street lenders to provide funding to SMEs shows the necessity for alternative finance options.

With a Business Cash Advance, small business owners can get hold of the funding they need.

In a blow to small businesses across the country Nationwide, the UK’s largest building society, this week announced it was delaying its plans to lend to small and medium-sized enterprises.

In May 2012, Nationwide announced plans to take on established SME lenders, but as reported this week by the Guardian newspaper (27/08/2013), this plan has been delayed, constituting a setback for the many SMEs desperately in need of funding.

In contrast, leading small business finance company Merchant Cash Express (MCE), and its product Business Cash Advance, recently celebrated providing more than £50 Million to UK SMEs – showing that there are viable finance options available to small businesses.

Nationwide has reportedly put the move on hold until at least 2016 and blames the requirement from European regulators that lenders hold more capital against the amount of risk they take on.

Essentially, under EU rules, banks, building societies and other lenders need to increase their leverage ratio - Something a step into small business lending could potentially inhibit.

Paul Mildenstein, Managing Director of MCE, said: “In the current climate it is already difficult for SMEs to get the money they need to develop their businesses from traditional sources and this latest setback indicates it is not going to get any easier soon.

“Nationwide’s delay further indicates the high street’s inability and reluctance to lend to SMEs. However with a Business Cash Advance small business owners can get hold of the funding they need.

“We were the first business in the UK to offer businesses a ‘cash advance’ which provides a refreshingly simple way for companies to repay the money as they earn. So they only repay once they have the takings to do so. No other borrowing instrument or loan product is this flexible.

“We understand that time is precious and so is cash flow. There are no complicated forms and we approve more than 90% of applications. With the repayment as an agreed percentage of card takings, it’s friendly on the cash flow, because if the business doesn't get paid, we don’t either.”

This latest news comes shortly after the publication of figures from the Bank of England showing there was a £452 million drop in lending to SMEs in May. The decline was part of a £1.27 billion fall in overall business lending.

The research, carried out as part of the bank-funded BDRC Finance Monitor, showed the number of companies using external finance dipped to a new low in the first three months of 2013 with just 39% of SMEs seeking credit. When a similar study by the same organisation was undertaken in 2011 that figure was over 50%.

The BDRC research suggests it remains the smallest firms, with less than 10 employees, which are the ones least likely to use external finance - just 52% compared to the 73% of larger companies.

To find out more about the MCE and the Business Cash Advance product, click here.

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Deborah Mudway
since: 03/2012
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