Britain backs push for alternative small firm funding sources

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LONDON May 20 British firms should look for funding outside the banking sector, Business Secretary Vince Cable said on Monday, marking the latest effort to generate growth among small- and medium-sized businesses (SMEs). Faced with a barely growing economy, the government has targeted smaller companies as a major source of growth and has introduced reforms to encourage start-ups and make it easier for existing businesses to expand."Britain's businesses cannot grow, export and innovate without proper access to bank credit. But they also need alternatives when looking for finance," Cable said. "The government wants to see a shift in the market structure towards non-bank lending."

Bank funding for SMEs has shrivelled in the wake of a global banking crisis, which has made traditional lenders more cautious and, according to a recent UK study, created a cash-flow crisis that is stifling small firms.

Cable's comments coincided with the launch of a guide to alternative sources of financing, published by business lobby group the Confederation of British Industry (CBI).

The CBI said high-growth, medium-sized businesses could be worth an additional 20 billion pounds ($30.4 billion) to the British economy over the next seven years if they can gain access to finance through alternative channels. The CBI highlighted traditional but underused funding options, such as the retail bond market and private debt placements, but also promoted more innovative approaches such as online "crowd-funding" platforms which enable individuals and businesses to back specific projects.