The UK's small and medium-sized enterprises are celebrating the measures taken in the budget yesterday to offer them additional financial support by amending the Small Firms' Loan Guarantee Scheme (SFLGS). The changes outlined plans to increase the fundi
FINANCING SMEs: SUPPORT OR STUNT?
"The Chancellor's PR stunt to apparently assist small firms to get credit by extending funds available and the size of businesses eligible, is an absolutely pointless move", says Kirsty McGregor, Chairman of the Corporate Finance Network, a UK-wide network of fourteen independent accountancy firms that specialise in raising finance for SMEs.
"There is no shortage in the funds required by banks. They have had excess capacity with their SFLGS facilities since the wide sweeping changes to the scheme that were introduced in December 2005. Despite corporate statements, the banks used this revamp of the scheme to assess their appetite for SFLGS propositions and most are less willing than before to offer it.
"In addition, the main problem is that a rule was introduced in December 2005 to limit the eligible businesses to those under 5 years old. The scheme was introduced for businesses who had a good banking proposition, but just lacked the tangible asset security that the bank required. There are many businesses out there that are older, more established businesses, but due to the nature of their sector don't have traditional assets, especially if they don't own a freehold property for their premises.
"The government is continuing to focus on the more newsworthy high growth and technological fledgling businesses, but isn't providing any assistance for the many thousands of traditional sector small businesses in this country. Who is looking after this nation of shopkeepers that we are supposed to be so proud of?"
In a statement, the British Bankers Association asserted that: "Changes to the small firms' loan guarantee scheme will make it easier for firms to get credit and for banks to have a safety net when lending in that vital but volatile start-up time." Kirsty believes that this is an attempt to secure positive press coverage.
The sector is suffering incredibly bad PR at the moment, and they should look to what's happening in the real world. This move will not help your typical SME to get credit. Luckily, there are lenders out there who are more flexible, but they're not part of the 'establishment'. Unfortunately most SMEs don't know this, because most don't have access to quality corporate finance advice or assistance from their accountants. This is exactly the reason why we formed
The Corporate Finance Network last year."
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For more information or comment, please contact Jo Edwards at JE Consulting info@je-consulting.co.uk
