21 October 2014

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Financial Supply Chain

In the world of international trade, the process of exchanging payments, information and documents between buyers, sellers, banks, and other involved parties is becoming increasingly important for financial institutions. This community aims at presenting views and innovative ideas related to this financial supply chain space.

SMEs suffer because of missed Merlin targets

17 February 2012  |  3412 views  |  0

30% of UK SMEs have missed growth opportunities because they weren't able to access finance - Federation of Small Businesses

There has been much coverage in the press this week about the failure of the UK banks to reach the lending targets agreed under “Project Merlin” back in February 2011. As part of the deal, the four main banks (Barclays, LBG, RBS and HSBC) agreed to lend about £190bn to businesses during 2011 - including £76bn to small businesses. 

The result for 2011 is that they lent £214.9bn overall to UK businesses including £74.9bn to small businesses. The banks missed gross lending targets for small businesses in 2011 by more than £1bn but beat the target for all businesses by £24.9bn.

A more accurate picture is provided by the net lending statistics (when repayments are taken into account) which fell in every quarter of 2011 with a 3% drop in the final quarter resulting in a net fall in lending for the year of £9.6bn.

This is not good news for the UK’s beleaguered SME sector who are finding it increasing difficult and increasing costly to access capital. According to the Federation of Small Businesses, 30% of small businesses say they missed a growth opportunity because they weren't able to access finance at the right times and the numbers show that money intended for "new and fledgling firms" is going to bigger businesses. High loan costs and strict conditions are discouraging SMEs from borrowing.

Perhaps it’s time to look more closely at the way financing is provided to the SME sector. Financing should be cheaper and more accessible to the SMEs whilst at the same time being less risky and more easily administered by the lender. 

Fortunately transaction based lending, where the provision of finance is closely linked with business operations and activities, does provide an easier way of accessing finance. Advancing funds for specific purchases or providing early access to identifiable receivables helps the SME manage their working capital and provides timely access to funds to help the business grow. 

With the continuing squeeze on traditional lending, we will see continued adoption of supply chain financing mechanisms and platforms.

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