by Malcolm Hyde, regional director, CBI South East

Recent headlines have pointed accusatory fingers at the banks for not achieving their targets under the Merlin Agreement.

There are, and I suspect always will be, arguments from both business and the banks as to why this has happened and whether the topline figures paint an accurate picture.

Achieving a consensus is unlikely - lies, damn lies and statistics springs to mind.

Better then to look forward by recognising that while improved access to more varied sources of finance would help SMEs and the wider economy, the barriers to increasing non-bank lending also need to be tackled.

While banks will remain an important part of the funding landscape, growing firms also need 'patient' capital, with a longer investment return horizon.

To deliver this, we need to give our firms access to new sources of funding, in addition to the government's £1 billion of Business Finance Partnerships.

This is as much a problem of demand as supply. Firms need independent help and support to locate the finance that's right for them.

So we must cut through the red tape and complexity surrounding non-bank finance to make it more easily understood and to make it simpler for alternative lenders to judge the credit worthiness of SMEs.

To increase the amount of funding available for medium-sized businesses, the recommendation would be that the government establishes a mid-sized bond market in the UK, using a mix of new infrastructure and tax incentives.

Retail interest can then be stimulated in mid-sized businesses' bonds through new tax-free savings in an ISA. Short-term tax incentives, similar to Venture Capital Trusts, could be used to encourage investment in the new bonds.

Combating a lack of awareness among SMEs about sources of non-bank finance will be vital to help stimulate demand.

Only around 10% of these businesses seek asset-based finance and fewer than 5% choose bond or mezzanine finance.

The existing programme of Independent Financial Advisers (IFAs), which serves consumers, should be expanded to meet the needs of SMEs.

The government should work with the financial services sector to help make non-bank finance much less complex and bureaucratic.

Vince Cable is on board and has set up a taskforce which will work with businesses, lenders, investors and providers of alternative finance to examine structural and behavioural barriers to raising non-bank finance.

It will set out what steps are needed to ensure businesses can access a wider range of alternative finance sources.

The CBI has given its input ... over to you Vince!