Home Business News Changes called for after £190bn funding gap for business exposed

Changes called for after £190bn funding gap for business exposed

by LLB Editor
16th Mar 12 2:15 pm

A report has warned that businesses must have better access to finance or there could be a funding gap of up to £190bn in five years’ time.

A government-appointed committee, led by Legal & General boss Tim Breedon, revealed the findings and called for the introduction of a Business Finance Advice Network.

Under the proposals this would be a single agency to take over the running of all the government’s programmes to support small businesses and boost their funding.

Tim Breedon said: “There is compelling evidence that access to finance is expected to become more acute as business confidence and growth returns, whilst continuing bank deleveraging is likely to leave a significant funding shortfall.”

This is a problem that the Federation of Small Businesses (FSB) has been targeting for some time.

FSB London senior development manager Matthew Jaffa has said the report’s findings will be a great starting point for the government to put an end to this persistent issue.

Access problems have also been brought into sharper focus after it emerged that state-backed Royal Bank of Scotland rejected around 26,000 small business requests for a loan last year – which is around 10 per cent of the requests they received, according to the bank.

“It’s obviously not going to happen overnight, but it’s an extremely important first step and the problem of lending to small businesses, particularly loans and overdraft, is not going to go away quickly,” Jaffa said.

“That’s an inherent problem and it’s been that way as you come in from a boom back into a recession in the past.”

Jaffa praised the report for highlighting alternative cashflow methods, such as supply chain finance, and looking to stop the access problem for good.

He added: “We need to break that cycle and bringing alternatives to the market helps reinforce the message that small businesses can go elsewhere, away from the simple loans and overdrafts, which has always been the standard bearer model for small business lending.”

The introduction of the Business Finance Advice Network, has also been endorsed by the FSB as a great start to providing stronger representation for small businesses.

John Walker, National Chairman, FSB, said: “Putting the Government’s financial products under one umbrella organisation and looking at a pilot SME bond scheme, as well as learning what works well in other countries is a good step forward and we urge the government to take forward the recommendations as soon as possible.”

However, the FSB will still continue to push for the introduction of a Small Business Administration to represent the interests of entrepreneurs within the government across all Whitehall departments.

Jaffa added: “We would still call for SBA because for too long the government hasn’t put small businesses first.”

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