Small and medium-sized businesses (SMEs) are set to receive a £70 million lending boost following government action to increase and diversify the availability of finance.

Three new lenders – Market Invoice, URICA and Beechbrook Capital – will share more than £30 million of government funding to offer SMEs alternatives to traditional bank lending. Each lender has committed to attracting additional funding from private sector investors, with expected totals of £70 million.

Business Secretary Vince Cable said, “A lack of access to finance is still choking off too many small businesses, preventing them from growing, taking on new staff or investing in new equipment.”

“We are taking a range of actions to support SMEs and shake up business finance markets, including through the new business bank. The £30 million announcement is an important boost for non-traditional lenders with creative and innovative solutions. It will increase competition and create a more diverse and balanced market for business lending.”

The funding comes from the small business tranche of the Business Finance Partnership (BFP). Through the BFP, the government committed to provide £100 million of funding for non-traditional lenders in order to diversify the sources of finance available to SMEs and improve competition. Currently, 85 per cent of all business loans are handled by the big four banks.

The government already has a number of other measures in place to address access to finance issues for SMEs. Since January 2009 the Enterprise Finance Guarantee has helped businesses secure over £1.7 billion of loans and the £200 million Enterprise Capital Funds programme aims to address the long-term shortage of risk capital for high-growth SMEs.