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Government ponders finance alternatives for smaller firms

The government has begun the task of investigation alternative possibilities for small business finance.

The consultation period on the government's green paper, Financing a Private Sector Recovery, ended on 20 September.

Business Minister, Mark Prisk must now decided on how best to proceed with plans to increase the range of finance options available to businesses that often find themselves too reliant on bank lending for credit.

The green paper garnered over 160 responses, and the government is in discussion with both business groups and the financial services industry.

One particular solution may be supply chain finance. This usually involves a buyer organising finance based on its credit rating and on invoices approved for payment to suppliers. The aim is to ensure that businesses further down the supply chain are able to cover their working capital while waiting for payments.

Commenting on the discussions, Mr Prisk said: "Small businesses will be critical to the economic recovery, and helping them access a range of finance options is essential for those firms looking to expand and grow.

"We want to work with business to find the best solutions for increasing finance to small firms, who have previously relied on banks for their finance. I am delighted to see the responses to our finance green paper suggesting alternatives to traditional bank lending.

"Supply chain finance is clearly an option that all large corporates should consider providing. It is one option that could help plug the funding gap of their suppliers while looking to cover working capital as they await payments. I look forward to further productive discussions on other finance options."