LEP calls for free access to finance advice for businesses
Businesses in Shropshire should have Government-funded advice on access to finance with an increasing number of cash-strapped SMEs hit by a lending squeeze, the region's LEP said today.
One in 10 small and medium-sized businesses have struggled to access finance in the past year, despite an agreement between the Government and the banks to ensure funding is available.
Chairman of the Marches Local Enterprise Partnership, Dr Geoffrey Davies OBE, said SMEs were still struggling to get their hands on credit through the Project Merlin scheme, the lending agreement established one year ago.
He said: “Many businesses are turning to alternative methods of raising funds, with even large companies currently reporting they are having trouble accessing bank finance.
“SMEs have traditionally encountered problems when approaching banks and non-bank lending groups to support fixed capital investment and provide working capital for their operations. However, we believe there are steps which could be taken to help these enterprises, which make up around 90 per cent of the business landscape in the Marches.”
The Marches LEP has sent a number of recommendations to the Department of Business, Innovation and Skills, and offered evidence that micro and small businesses still see banks as the main provider of external finance.
Responding to a BIS consultation on Improving Access to Non-Bank Debt, the LEP is calling for a Government-funded service to give micro and small businesses free and impartial one-to-one advice and support with accessing the finance they need.
Dr Davies said: “We have also recommended that the Government require the banks to provide appropriate lending facilities and reasonable notification of any changes within their terms and conditions, given that the banks are still the first port of call for companies.
“We want excessive interest rates in sectors such as home credit and pawn broking to be banned and we've also raised the issue of needing to enhance enforcement against illegal lending and promote financial literacy and public awareness.”
The LEP, the private-sector led partnership tasked with revitalising the economy in Herefordshire, Shropshire and Telford & Wrekin, wants the Government to support the creation of Post Bank, which would have business desks in post offices across the UK.
It is also calling for non-bank lending groups be regulated and said they should provide some flexibility and favourable terms and conditions to micro and small business.
The Bank of England's latest Trends in Lending report shows new lending to small businesses fell again in the three months to November 2011. Year-on-year, lending to companies with sales of less than £25m has fallen by 6.1 per cent.
Credit demand from the smallest businesses – those with sales of less than £1m – collapsed by 35 per cent in the three months to November.
