Are the banks supporting smaller businesses?

As part of NSBL’s banking& finance feature James Durie, who is Executive Director of Bristol Chamber of Commerce & Initiative Bristol, discusses access to finance and the current lending context.

With our economy still very challenged, it would be nice to think that businesses with growth prospects, or keen to enter new markets, would be encouraged and given every chance to do so.

But in our latest chamber economic survey, 20% cite finance availability as a main barrier to growth – only slightly behind ‘lack of demand’. This is a continuing theme for smaller businesses.

Are the banks supporting smaller businesses

Are the banks supporting them? It’s still early days to judge whether the ‘taps’ are more open with government initiatives such as the Funding for Lending Scheme with its funding rate discount of 1%. Those involved are certainly keen to promote it but anecdotally there is still little evidence of increased lending to business.

The banks have certainly tightened credit assessment in recent years and charges increased. But to some extent going “back to basics” was necessary as overlending got us into trouble in the first place.

If a company has a good case, is well prepared and presents well, it’s still possible to get funding for working capital. But high-risk start-ups and speculative proposals are not going to get help from the banks: it’s not their role to provide risk capital.

We continue to find that many businesses don’t know about excellent fund sources such as The Enterprise Investment Scheme – which links borrowers with private investors looking to invest risk capital. An LEP fund is also being set up under the Regional Growth Fund banner.

There has been an explosion in new and innovative sources of funding from “peer to peer” or “crowdfunding” sources. These sound promising, but do come with a health warning as they are still a new concept.

Our advice? Speak to your accountant before money constraints cause problems. As your chamber we are also here to point businesses in the right direction and through our wider Business West offer can help them prepare business cases to raise funds for working capital or risk capital. And we can direct them towards sources of funding.