There’s been a lot of talk lately about the improved lending conditions by the High Street banks, especially for small businesses. However this story doesn’t seem to stack up according to chartered accountants in London who are reporting that small businesses are still facing severe problems accessing financial help from the banks.
Trade and industry has always relied on banks to provide support and assistance to help with expansion. Business loans, overdrafts and services like factoring and invoice discounting all help companies keep the wheels in motion, providing the necessary capital and buffering to allow companies to grow. But with all the major banks vastly cutting back their lending since 2008, small businesses have been struggling to access these services.
The main reason is that small businesses are considered a risky market to lend to, and banks are worried about bringing their own balance sheets into order. The banks are also being forced to hold more of their loan books in the form of their own capital, to act as a buffer against future failures, which means they have less scope to offer loans.
Many chartered accountants believe that the Government changes haven’t been all that effective in helping small businesses. It’s these businesses that are often held up as the driver of wealth and job creation, yet the feeling is they’re being left out in the open and not supported adequately.
The Autumn Statement offered some help with changes to business rates and the Enterprise Finance Guarantee scheme has underwritten loans to small businesses which total £111 million in the third quarter of 2013. But because the current Government seeks a non-interventionist approach, it is trying to let market forces affect change.
Chartered accountants in London are currently advising their small business clients on emerging finance options. Some of these solutions do require giving up an equity stake in the company, but they can secure the advice and resources of experienced businessmen and entrepreneurs, or investment from venture capital funds owned by Blue Chip companies.
If 100 per cent ownership of the company is important, then other options are available, for example crowd funding via sites such as Funding Knight, or invoice discounting services through Platform Black.
These options from the private sector offer viable alternatives to the traditional banks, but come with their own particular idiosyncrasies. HW Fisher chartered accountants in London believe these avenues should be explored, but also that the Government could do more by relaxing some of the operational rules and regulations which can limit the flexibility of small businesses.
What do you think? Have small businesses benefited from Government changes?