Small businesses are struggling to find finance with traditional lenders and this is causing a problem for economic growth in the UK.
The FSB have recently issued a statement saying that the government should look abroad for finding other ways to finance small businesses in the UK.
There are numerous other types of lending models that can be adopted by small companies looking for finance.
The FSB issued a report which showed how some methods of funding adopted in countries, such as Germany and the United States, could work with small businesses in the UK. The report examined things such as peer-to-peer lending.
In the three years after the beginning of the financial crisis in 2007, the amount of applications made for lending by small firms in the UK fell by nearly 25 percent. This was significantly less than the drops in other countries, for example, Germany saw just a 10 percent drop.
In the United States, the figures were closer to Germany than they were to the UK. The US also has the advantage that the government will guarantee loans that are made to small companies.
The FSB also said that the government should consider opening an investing account, which would encourage peer-to-peer lending. The overall tone of the report was that if the variety of credit options do not improve then credit is not really going to become more available in the near future.
Ted Salmon is a regional chairman of the FSB and he commented, “When you compare our bank loan system to other countries, such as the United States or Germany, you can see how we simply fail to deliver to small businesses.
There are particular regions of the country where this failure is particularly evident, for example the North East. The government is spending too much time trying to fix the current methods of lending, instead of doing what they should be doing, exploring new methods of financing.”
The report is more than just a criticism of the lack of current lending options, and it offers a great many alternatives that could work in the UK and help create a financial system for small businesses that would rival that seen for larger institutions.