alternative business finance

With small business owners increasingly turning their backs on bank loans and instead using credit cards, the Federation of Small Businesses is calling for greater flexibility in the traditional forms of finance that are available to small firms.

According to the FSB's third biennial membership survey, the percentage of business owners using bank loans has fallen from 44 per cent to 30 per cent over two years. The number relying on credit cards has risen from 18 per cent to 25 per cent over the same period.

Whilst credit card use is not without risks, its increasing popularity as a method of business finance reveals that flexibility, speed and ease of use are key concerns for business owners.

The FSB is arguing that the current review of the government's flagship Small Firms Loan Guarantee (SFLG) scheme headed by Teresa Graham is an ideal opportunity to make the scheme more flexible. the results of the review are expected in the next two weeks.

FSB Financial Affairs Chairman Neil Hamper said: "There are important lessons to be learnt from the increasing popularity of credit cards notably that many businesses are not able to wait six months to get their hands on funds.

"The Government must take a step back from the Small Firms Loan Guarantee scheme but also continue to encourage banks to offer more loans."

For more than 20 years the SFLG has been the principal method through which the government assists businesses in securing bank loans. But the FSB believes that current system is overly bureaucratic and can result is businesses waiting up to six months for notification of whether applications have been successful.

Many delays are the result of duplication in the application process which requires both the bank and the DTI to approve a loan. The FSB wants the government taken out of the loop leaving the banks to make decisions about the loans.

In addition to credit cards you might find other ways of helping your business finances and your cashflow such as