BUSINESS: Accessing finance – public funding schemes for small businesses (From Your Local Guardian)
BUSINESS: Accessing finance – public funding schemes for small businesses
3:18pm Friday 19th February 2010 in News By Hannah Holdroyd, Federation of Small Businesses
Last month we saw the technical end of the recession, however regardless of whether or not we enter a “double dip” recession, 2010 will be a hard year for small businesses, and many say harder than 2009.
In these financially difficult times, it is often more difficult for small businesses to secure private financing anything from, improvements to their business, taking on new staff to meet increased demand or for any further investment in that business.
Whilst the banks are extremely reluctant to lend to small businesses in the current economic climate, the Government is seeking to help small businesses through a number of funding schemes. In the pre budget report of December 2009, the Chancellor Alistair Darling, announced an extension to the Enterprise Finance Guarantee until 31 March 2011. This scheme is part of a number of measures already in place which the Government have designed to address the cash flow, credit and investment needs of small and micro businesses. They include:
- A £10bn Working Capital Scheme, securing up to £20bn of short-term bank lending to companies with a turnover of up to £500m.
- A £75m Capital for Enterprise Fund to invest in small businesses which need equity.
The Enterprise Finance Guarantee Scheme aims to help smaller companies which are finding it difficult to access the finance they need for working capital or investment in their company due to the tighter lending criteria being implemented by high street banks. The Government will provide £1bn of guarantees to support £1.3bn of bank lending to smaller firms with an annual turnover of up to £25m which are looking for loans of up to £1m for a period of up to 10 years. The guarantee will apply to loans and can also be used to convert existing overdrafts into loans.
Under the Working Capital Scheme, the Government will provide banks with guarantees covering 50 per cent of the risk on existing and new working capital portfolios worth up to £20bn to incentivise them to lend to small businesses by sharing the risk. The guarantee will also free up capital which the banks must use for new lending as a condition of the scheme.
Enterprise Funds have been around since 2006 for businesses that find it hard to access finance. As part of this scheme, the Government will offer to invest in viable companies which have high levels of existing debt through a new £75m Capital for Enterprise Fund. Banks are contributing to this fund. The fund, to be managed externally, will provide long-term capital to businesses which have exhausted traditional forms of finance.
Whilst they will not be an option for all small businesses, these funding opportunities offer help to credit worthy businesses who are only failing to access financing due to the current economic conditions.
These schemes are available by contacting Business Link via a dedicated funding portal which guides you through a series of questions to identify which schemes you may be eligible for.
Hannah Holdroyd is the London policy officer for the Federation of Small Business, the UK’s leading business organisation. She can be contacted at firstname.lastname@example.org