Should the Green Investment Bank support SMEs?

We are told small to medium-sized enterprises (SMEs) hold the key to our economic recovery, yet lack of credit continues to be a major barrier to small business growth.

It’s also clear green innovation isn’t the silver bullet for meeting tough carbon emission reduction targets in the UK. Indeed, much of our success in moving to a low carbon economy will depend on adoption of existing green technologies. So should the Green Investment Bank (GIB), which is being established to address “market failures” in the green sector, tackle these ones?

Interest free loans from £500k upwards

No really – this is not a joke! Loans are available from £500k upwards with no interest charged. As you would expect there are associated fees and charges to access this funding.

However, using a £500k loan as an example – if you were to raise this through ‘conventional’ routes at let’s say a 5% interest rate, this would cost you £5300 per month from your cashflow and you would end up paying just under £640k back + the relevant bank charges for setting the loan up.

Through this alternative route, it would cost you £53k and the loan only needs to be repaid at the end of the term (or in full before the term is up).

The process and associated costs are outline below. To find out more, please email me with an outline of your project.

Stage 1 – A business plan is prepared in the format required for the next step, including an ROI report, financial spreadsheet, broker questionnaire and other associated documentation in preparation to present to the fund brokers, as well as managing the process throughout. For this they charge £2,500+vat. (This is refundable if the loan is eventually granted).

Stage 2 – Documentation is submitted to the fund broker to seek outline approval. The broker prepares all financial information relating to the loan requested that clearly outlines to the client company what commitment is required.

Stage 3 – Once the go ahead is given by the client company, £3,000+vat is payable to the broker to undertake due diligence and make necessary arrangements to source the funds. (This is non-refundable).

An agreement to assign a 10% equity stake to the facilitator of the loan at this stage.

Stage 4 – When the loan is agreed, an insurance premium of 5% loan value is to be lodged in an escrow account – this is insurance for the value of the loan should the company be unable to repay the amount. Once the funds are in transit, this fee is then paid over.

A joint and several personal guarantee is also required from the company directors (typically £100k for a £500k loan, but this will be assessed case by case and advised at Stage 2) as the insurance does not cover all aspects of ensuring the loan is repaid.

Stage 5 – The loan is delivered. 5% loan value fee becomes due.

This process takes between 12 and 16 weeks.

The loan is repayable in full at the end of the 10 year term. It can be repaid earlier but as one lump sum, not staged payments.

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

BIS launches £50m Growth and Innovation Fund

Business secretary Vince Cable and minister for skills John Hayes have launched a £50m-a-year fund to help businesses “develop the skills they need to drive growth”. But is this really the most efficient use of funds?

The Department for Business thinks so. In partnership with private businesses and business groups, the Growth and Innovation Fund will invest in new training for firms to overcome barriers to growth within their own sectors.

The funding could deliver new training to boost productivity, enable industries to set up new professional standards, or support or extend National Skills Academies, the Department for Business (BIS) says.

Read full article: http://realbusiness.co.uk/finance/bis_launches_50m_growth_and_innovation_fund

‘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

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

Nearly half of SMEs have been turned down for a loan, survey reveals

The UK’s SMEs feel that still not enough is being done by the banks to provide finance and that the Government should force banks to lend.

That was the feeling in a survey from Touch Financial, one of the UK’s leading independent brokers, who spoke to over 300 small businesses throughout the UK about the state of their finances.

A resounding 92 percent feel that the Government needs to force the bank’s hand in lending matters, and 89 percent felt that still not enough was being done by the banks on their own.

The survey reiterated the recent media perception of banks not providing finances, as just under half (47 percent) had been turned down for a loan in the past 12 months and 70 percent knew another business who’d been turned down for finances over the past year.

The reasons cited primarily focused on a lack of security, a poor credit rating, or the considered risk of a particular sector, but the majority of banks either failed to give a reason or even – in one case – said that they were not lending at the moment.

Read full article: http://www.creditman.biz/uk/members/news-view.asp?newsviewID=12787

An entrepreneur’s guide to raising finance

At some point, all entrepreneurs will need some finance for their business whether it be a few thousand pounds or a couple of million. But who can provide it? This is a guide to the options.

Whether you’re starting up in business, or looking for funds to expand your operation, the key question of capital is sure to arise.

Put simply, this is the biggest sale of your life. Your business ideas will be tested to the limit, your business plan may be rejected, you will be quizzed on your figures, and all the time, the future of your business is at stake.

Read the article here: http://www.businesszone.co.uk/topic/finances/entrepreneurs-guide-raising-finance/30313?ref=ukbf

Funding Circle for lenders and borrowers – an alternative to banks

Small businesses in the UK are under the stranglehold of the major banks who charge them high interest rates and fees for borrowing. According to HM Treasury the top 4 highstreet banks make up 92% of total small business lending by the banks – with such a concentration of lending in just a few providers small businesses have limited finance options, and can’t access bond markets like larger businesses. Small, local businesses are also the unsung heroes and driving force of the UK economy employing 60% of the private sector workforce and generating 50% of our GDP. We need these businesses to be thriving and growing.

Watch the video below to see how Funding Circle works.

Read more here: http://www.fundingcircle.com/home/about-us/

Banks rake in £6m in fees from small business loan scheme

Banks have gathered almost £6m in fees by charging small businesses inflated rates to access the Government’s £1.3bn loan support scheme, official research has revealed.

The 5,800 companies that have drawn down their loans have typically had to pay 1.8pc of the loan in “administration fees” and accept a 6.75pc rate of interest. Both charges exceed standard industry levels.

Read more: http://ukenterprisehub.org.uk/2009/12/banks-rake-in-6m-in-fees-from-small-business-loan-scheme/