The Confederation of British Industry (CBI) has called on small and medium-sized (SMEs) firms to consider the broad range of finance options available to help them grow, a move hailed by Business Secretary Vince Cable.

CBI launched an alternative finance guide, Ripe for the Picking, highlighting research which shows that high-growth medium-sized businesses could be worth up to an additional £20 billion to the economy by 2020.

It comes as a GE Capital report shows that SMEs plan to spend £51 billion over the next 12 months, but will need the right funding to realise their potential.

The CBI said that UK banks are the source of nearly 80 per cent of all credit to growing businesses, however, the financial crisis has put the UK on an irreversible path to a ‘new normal’ in financing. Regulatory reform, balance sheet restructuring and a more realistic pricing of risk, mean that traditional bank debt will no longer be the right finance for all businesses, all of the time.

The CBI’s guide highlighted finance options available, including asset-based lending, equity investment and peer-to-peer lending.

Kajita Hall, CBI Chief Policy Director, said: “The UK’s small and medium-sized businesses are the backbone of our economy so ensuring they can access the capital they need to grow and create jobs is critical.

“Banks will continue to be a vital source of finance but it’s not a one-size-fits-all solution, and we’re encouraging growing firms to open their eyes to the broad range of funding options on the market.

“Growing businesses could look to corporate venturing, for example, or to issue retail bonds, like Hotel Chocolat diid with its innovative chocolate bonds.”

Vince Cable, Secretary of State for Business, said: “Britain’s businesses cannot grow, export and innovate without proper access to bank credit. But they also need alternatives when looking for finance, as a traditional bank loan might not always be the answer.

“The CBI’s guide will help raise awareness of the different types of finance available, and how alternative credit channels can introduce more competition to give SMEs choice. The Government wants to see a shift in the market structure towards non-bank lending, and through the business bank is deploying £300 million of the £1 billion allocated to the initiative to invest alongside the private sector in new entrants and the growth of smaller lenders.”

Speaking at the launch of the alternative finance guide yesterday, Vince Cable, also added: “Firms will want working and investment capital, the banks are very badly damaged, obviously in varying degrees, and are reluctant to lend, except in what they regard as ‘exceptionally safe investments’. So there is potentially a serious shortage of funding.

“There is a major issue around the availability of finance as we grow out of this crisis.”

“We’re beginning to see some traditional forms of finance: asset-based, invoice financing, new types of internet-based systems, peer-to-peer lending, angel investors, and we want to encourage these.”

“What is the Government doing? We’ve set up a series of initiatives, such as the Business Finance Partnership, which is already funding a number of these firms, supporting manufacturing supply chains, and potentially the most important the Business Bank, which is pulling together £2.9 billion of existing funding streams, with another £1 billion hoping to leverage this substantially into various forms of small business lending of a wholesale kind.”

Paul Aitken, CEO and founder of borro, said: “It is welcoming to hear Vince Cable say that the Government wants to see a “shift in the market structure to non-bank lending”. It’s time alternative forms of finance were considered mainstream. Small businesses and entrepreneurs are the life-blood of our economy and as much as possible should be done to support innovation, development and growth.”