The UK needs alternative solutions for SME funding

The previous few years have been a rocky road for the UK’s banks. UK SMEs have felt the effects of the stumbles in the banking industry more than most, with bank lending to the SME sector becoming especially restrained in an economic environment that has heightened the need for working capital to support day to day business operations.

However, although generally failing to meet the credit needs of SMEs the big 4 UK banks (Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC still manage to retain nearly 80% of all SME accounts.

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For some innovative funding solutions, take a look at the following:

£500k interest free loan

Funding from 0.9-2%

Loan application successes down to 65%

The Treasury has come under renewed pressure to persuade British banks to lend to small businesses after official data revealed a sharp drop in companies’ access to finance.

There was a steep fall in the number of businesses that were successful in their attempts to get loans last year, to 65% from 90% in 2007, according to the Office for National Statistics (ONS).

The data also showed the number of fast-growing businesses that felt banks were now less willing to lend was 15 times higher than those that thought the situation had improved.

Read more: http://www.guardian.co.uk/business/2011/oct/28/small-businesses-failing-loans?newsfeed=true

Banks Aren’t Lending – So What Do You Do?

There are an increasing number of stories in the press about the lack of funds being made available for small businesses.

So what is a small business to do if funds are required to help with growth plans or support cash flow?

Well, in the current climate there are a number of innovative cschemes coming to the market that could well provide alternative sources of funding for small businesses. Recently there have been £500k interest free loans and invoice funding from 0.9-2%; all of which are viable options for small businesses.

If you’re unsure of the different sources of funding that are available, you may find the following article of interest: Different Types Of Funding

Cable increases pressure on banks to lend to SMEs

UK business secretary Vince Cable has announced that he wants all banks to publish lending figures to SMEs and to give full details of why customers are turned down for loans.

Cable warned that any banks who do not meet lending targets for small businesses are going to face new taxes on bonuses, profits and balance sheets. He told MPs that Project Merlin was a one-year project and that banks must ensure that targets for the year are met.

He said to the House of Commons that extra pressure would be put on banks to ensure transparency in their actions towards SMEs. Banks in the UK have insisted that the current low lending rate to small businesses is due to lack of demand, not loan refusals. However, Cable argues that banks have discouraged applications by offering high rates and not showing interest in lending.

Read more: http://www.inspiresme.co.uk/news/general/cable-increases-pressure-on-banks-to-lend-to-smes-02847/

Appeal if the banks reject you

Access to finance remains high on the agenda for many small businesses.

While business groups are keen to keep up the pressure on the banks, backed by the Government, for some firms it may be better to look elsewhere.

Small Business Minister Mark Prisk has urged firms that believe they have been unfairly turned down for bank finance to use the appeals process to hold the banks to account.

He says that while access to funding for small firms has improved since this time last year, there are still cases of seemingly viable businesses being rejected for finance.

He urges small business owners who feel they have been unfairly treated to appeal to their bank and recommends they write to their MP about the situation.

Read more: http://www.thisismoney.co.uk/work/small-business/article.html?in_article_id=524672&in_page_id=10#ixzz1FvUiua6z

‘Bank of Manchester’ could spearhead SME loans

A ‘Bank of Manchester’ with £100m to spend on start-ups is one of a number of ideas put forward by Pro Manchester to help encourage small businesses and entrepreneurs overcome funding problems.

The body, a membership organisation for the financial and professional services sector, has drawn up a report on innovation and enterprise with 10 recommendations which it believes will help economic growth.

Read more: http://www.thebusinessdesk.com/northwest/news/119451-bank-of-manchester-could-spearhead-sme-loans.html?news_section=4148

Bank lending targets set to disappoint ministers

Britain’s biggest banks are set to increase the amount of money they lend to small businesses – but not by as much as the government had hoped.

The Coalition has been locked in a series of secret discussions with the country’s leading banks under the codename ‘Project Merlin’ for several weeks, and the talks are set to conclude imminently.

During the talks – which have involved HSBC, Barclays, Royal Bank of Scotland and Lloyds – the Government has pushed for the creation of a small business lending target, which will oblige Britain’s financial houses to furnish a specific sum for the country’s emerging firms.

It is believed the banks have agreed to lend up between £150m and £180m to small firms this year; this is a significant increase on the amount loaned in 2010, but far less than the £200 million the Treasury was hoping for.

Ministers had hoped that, by increasing the availability of funds for new and emerging enterprise, they would encourage a burgeoning economy built on entrepreneurial spirit – a vision which prime minister David Cameron has often discussed.

Read more: http://www.growingbusiness.co.uk/bank-lending-targets-set-to-disappoint-ministers.html

Essential Business Advice Tips: Finance

Lenders must ‘get clever’ to aid small business growth

Lenders need to innovate and ‘get clever’ in the way they provide finance, in order to aid small and medium business growth, according to a recent whitepaper.

‘Financing Britain’s Growth’ explores the many challenges currently facing UK small and medium sized enterprises, and outlines the prerequisites for business growth as expressed by leading companies and business bodies.

Organised by invoice and asset based lender, Venture Finance, the whitepaper combines the views of leading business organisations, including: the Department for Business, Innovation and Skills (BIS), the British Business Angels Association and KPMG.

Among the main challenges to small firms are their reluctance to invest in their business, or take on more debt, cashflow problems and late payments, and the increasing risk of insolvency as deferred tax debts start to bite.

Read more and access the whitepaper here: http://mybusiness.co.uk/YRTK_9No6VWuDg.html

Government should force banks to lend, say small firms

The majority of small and medium sized businesses feel that not enough is being done by the government to force banks to lend, a new survey has revealed.

The report found that just under half (47%) of small companies have been turned down for a bank loan in the past 12 months, with a further 70% of entrepreneurs knowing another business that has been declined finance. Furthermore, 92% of business owners feel that the government needs to force banks to lend more to small and medium sized firms, with 89% saying that not enough was being done by the banks on their own

Read full article: http://www.growingbusiness.co.uk/government-should-force-banks-to-lend-say-small-firms.html