More evidence that the financial crisis has permanently changed the way businesses finance themselves has emerged, this time from the Item Club, the long-established economic forecasting group that is sponsored by the consultancy EY.

In its latest Financial Services outlook, Item reports that the proportion of Small and Medium-sized Enterprises that use only bank loans, overdrafts and business credit cards to fund themselves has dropped from 29% in 2011 to 20% in the first half of 2014.

Taking up the slack has been the growing range of non-bank finance providers, ranging from P2P and crowdfunding websites, to specialist direct lenders, non-bank asset financiers and invoice finance operations. Given that the SME Finance Monitor finds that only about 50% of businesses use any kind of external finance, this clearly suggests that the bank-only section of the business market is shrinking quite significantly as more companies look beyond the traditional range of choices.

The Item Club, which was founded in 1977, uses the Treasury’s economic model to produce its regular forecasts – hence the acronym Item, or Independent Treasury Economic Model. It predicts a £1bn increase in the stock of lending to businesses in 2015, although this will do little to offset the long decline in business lending that began in 2008. 

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