Recently the business minister explained plans to establish a new bank with the following message: “the Government understands the frustration felt by many small and medium sized businesses around securing credit … many new promising growing companies simply can’t get the loans they need to expand on reasonable terms”.
There a number of points which show why the Government doesn’t understand:
1. 50% of small businesses fail inside the first 3 years which clearly shows there isn’t enough support for the SME sector which makes up over 95% of the businesses in the UK.
2. Clearly the Government has no experience running a business so they should consult those that do. But who are the Government’s advisers? Look for example at the Prime Minister’s Business Advisory Group. They are all representatives of large corporations with no experience of securing credit for, or working with SMEs. Interestingly, nobody in a government position has ever asked ASC for input, despite the fact that we have been arranging business finance for 1000s of SMEs for over 40 years.
3. Companies can get the loans they need on reasonable terms. It is just a much more difficult journey than it was in 2006 or 2007. Banks are more cautious (and in many cases perhaps rightly so) and they are far more pedantic when underwriting a loan. But finance is available.
4. Why do I say this? Because we are in the business of securing credit for new, promising and growing companies and I can tell you that credit is available. The only difference is it can’t be arranged in the way as it was done in 2006 and 2007 and it is not available on the terms offered in 2006 and 2007 – but who on earth would want to go back to those days.
5. The Government is actually not focusing on small businesses. The business secretary gives it away when he refers to “growing companies” yet most businesses in the UK are not incorporated (in fact only 28% or) and the business secretary overlooks that 95% of all businesses in the UK employ fewer than 10 staff (according to the 2011 statistics* published by Dr Cable’s department).
I hope you found my comments useful and I will leave it to you to consider the success of the newly announced scheme.
*Business Population Estimates for the UK and Regions 2011