SMEs put themselves at risk

According to the new research by the Asset Based Finance Association (ABFA), 56 per cent of SMEs aren't aware of the amount of financial support available from the Government.

SMEs were asked if they were aware of the Enterprise Finance Guarantee Scheme, Working Capital Scheme or the Capital Enterprise Fund, which have all been developed by the Government to provide much needed financial support to the country's small businesses. A massive 56 per cent came back and said that they hadn't heard of any of the schemes.

Kate Sharp, chief executive officer from the ABFA, believes that SMEs are at risk due to a lack of understanding about the Government's financial offerings. She said: "Over the last few years, the Government has stepped up to support UK SME organisations through various schemes. Unfortunately, there is a severe lack of understanding among this group about what financial support is actually out there. If they don't know about the schemes, how can the Government help them?"

The research also highlighted that obtaining credit insurance is also an issue for SMEs. Credit insurance minimises the risk of customers defaulting on payments or them going into administration. Of those interviewed 78.8 per cent said that as much as 20 per cent of their client base had been refused credit insurance over the last six months. More worryingly, 2.6 per cent said that over 81 per cent of their clients had no credit insurance whatsoever.

This means that nearly 100,000 SMEs in Britain are putting their businesses at risk by not ensuring they are fully protected. These firms are denying themselves the opportunity to manage the risk of losing money and reducing their own credit ratings, which will impact on their ability to obtain credit from suppliers.

The time it takes for invoices to be paid is also extending, as average debtor days lengthen. Over 11 per cent of respondents report that it is taking over 70 days for them to get paid compared to just 6.6 per cent last year - that is more than double the normal trading terms.

Kate Sharp continued: "With the external pressures on SMEs growing daily, it is worrying to see the reduced availability of credit insurance putting extra pressure on these companies at a time when they are already facing many other pressures. Coupled with the fact that debtor days are extending, it is more important than ever that businesses try to protect themselves against unforeseen circumstances."

The research also suggests that unemployment may slide further with 81 per cent of SMEs questioned planning to make as much as 10 per cent of their workforce redundant over the next six months.

Over 2,000 SMEs were interviewed for the research, which was undertaken by Hilton Baird Financial Solutions, and were asked about the current state of their finances, the wider economic troubles and attitudes towards asset based finance.

Source: Asset Based Finance Association

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The “World’s 50 Safest Banks” 2009

With bank stability still high on corporate and investor agendas,Global Finance publishes its 18th annual list of the world’s safest banks. After two tumultuous years that saw many of the world’s most respected banks drop out of the top-50 safest banks list, the dust appears to be settling.

Those banks that kept an iron grip on their risk exposure before the financial crisis blew up have consistently topped the table and maintain their standing among the top echelon in this year’s ranking. At the same time, the big name banks that lost their safest bank ranking during the credit crunch are still absent from the list as they struggle to rebuild their credit standing.

The “World’s 50 Safest Banks” 2009 were selected through a comparison of the long-term credit ratings and total assets of the 500 largest banks around the world. Ratings from Moody’s, Standard & Poor’s and Fitch were used.

Read more: http://www.gfmag.com/tools/bank-rankings/2341-worlds-50-safest-banks-2009.html

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€100 million EU micro-finance facility to help unemployed start small businesses

The European Commission has on July 2, 2009 proposed to set up a new microfinance facility providing microcredit to small businesses and to people who have lost their jobs and want to start their own small businesses.

It will have an initial budget of €100 million, which could leverage more than €500 million in a joint initiative with international financial institutions, in particular the European Investment Bank (EIB) Group. The new facility is one of the actions announced in the Commission's communication: 'A Shared commitment for employment' on 3 June

Read more: http://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=547&furtherNews=yes

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Carbon Trust expands interest-free loans to help more SMEs survive the recession and cut carbon

The Carbon Trust is to improve access for small and medium businesses to over £100m in interest-free and unsecured loans, it was announced today. The move is intended to help more businesses survive the recession by cutting both their energy costs and their carbon footprints.

Thousands of small businesses have already slashed their annual energy bills, some by as much as 75%, by installing new energy-saving equipment paid for by Government-funded Carbon Trust loans.

Now the Carbon Trust has extended eligibility for the recently-expanded loan fund. The minimum loan amount has been lowered to just £3,000, putting the loans within reach of micro-businesses; the upper limit has been doubled from £200,000 to £400,000 to meet the needs of small and medium businesses with high energy spends, such as manufacturing companies.

The Carbon Trust expects to deliver over £100m in loan funding to UK SMEs over the next two years, including almost £84m in England allocated by the Government as part of Budget 2009.

In most cases, businesses taking a Carbon Trust loan to update their equipment find the savings they make on energy bills exceed the cost of the loan repayments. This means they benefit from brand new equipment, increased efficiency and reduced running costs, all at no expense to themselves. They also help to drive the UK’s move to a low carbon economy.

Read more: http://www.carbontrust.co.uk/News/presscentre/loans-expansion.htm

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SMEs 'must show financial transparency'

Credit ratings expert calls SMEs to show 'financial transparency' if they want to avoid lending decisions being based on accounts compiled during the recession

Confidential financial information may have to be disclosed by small and medium sized companies if they want to avoid lending decisions being based on accounts compiled during the recession.

An economic upturn is expected in 2010 but credit decisions for small to medium enterprises, the bedrock of the UK economy, may be based on statutory accounts two years old, a credit ratings expert and the UK’s largest trade credit insurer have warned.

Read more: http://www.accountancyage.com/accountancyage/news/2244769/smes-show-financial

Source: Accountancy Age - Written by David Jetuah

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Finance Priorities: short term issues or long term success?

How can senior executives respond to the short-term pressures of today's volatile operating environment, while keeping their companies on track in the longer term?

Prepared by CFO Europe Research Services in collaboration with Microsoft, The future according to finance: Balancing short-term priorities and long-term vision sets out to answer this question. Nearly half of the CFOs and other senior finance executives surveyed for the report say they are giving more priority to short-term issues than they were a year ago.

Download the full report here: http://www.microsoft.com/uk/peopleready/knowledge/

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Banks condemned by Treasury Committee for failing to support small firms

The UK's banks have been dealt another damning blow in the latest report on the banking crisis from the Treasury Committee. Bankers were blamed for making "an astonishing mess" of the financial system, leaving the Committee "very concerned about the availability and terms of credit available to the small business sector". Committee chairman John McFall added: "There is clearly an unresolved inconsistency between, on the one hand, bankers' assurances that they are increasing their lending and, on the other hand, widespread and clearly sincere complaints that credit is difficult to obtain and increasingly expensive."

The report, while welcomed by the small business sector, has been criticised by the British Bankers' Association (BBA) for not doing enough to reflect the work by the banks to help restore the economy and for "seeking headlines". BBA chief executive Angela Knight said: "As an industry we have stepped up to the plate of change and are already addressing many of the points identified by the Committee."

Read more here: http://www.parliament.uk/parliamentary_committees/treasury_committee/tc0809pn37.cfm

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Cash-strapped small businesses are losing out on the chance to defer a potential £7.7bn of tax payments due to poor finance skills

....and a failure to seek out professional advice. New research for the AAT, the leading professional education and membership body for accounting staff, found that an unnecessarily complex tax regime and a lack of finance training is compounding the impact of the recession, at a time when this sector - considered the ‘backbone’ of the economy – needs to make every penny count.

Common mistakes which cost firms cash include incurring fines for late filing of accounts; failing to claim Business Rate Relief and ignorance of opportunities such as the ‘Time to Pay’ scheme, which allows those companies unable to pay their tax bill to spread payments.

Business rates are a major cost to SMEs per annum and rate relief could be worth up to £1200 per firm. Despite this, over £400m of Business Rates Relief goes unclaimed each year, in large part because firms are not aware of the opportunity. The scheme, introduced in 1990, closed on 1st April, further impacting on small businesses.

Read the full article here: http://www.aat.org.uk/about/content/item19416/

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High street banks’ lending to small businesses increased by £211 million

There was little change in deposits, while over 44,000 new small businesses banking relationships were established.

Commenting on the data, BBA statistics director, David Dooks, said:
“Lending to the 3.8 million small businesses supported by the main high street banks rose again in February and significant numbers of new small business relationships continue to be established, despite the current recession and regular reports of difficult business conditions. Deposit balances are little changed, reflecting the slow trading environment many businesses are facing.”

Source: www.bba.org.uk

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Think tank says small businesses will be 'drivers of the recovery'

A call to break up the banks, split retail and investment banking, and provide a lot more support for small companies....

The New Economics Foundation (NEF) says that the latest Government efforts to revive the economy will not work as the UK's banks have become 'unfit for purpose'.

Don't throw good money after bad

The organisation has urged the Government to rebuild a sound financial sector. Instead of 'throwing good money after bad', NEF suggests the Government should:

de-merge the big banks
separate retail banking from corporate finance and securities dealing
support community finance initiatives and small businesses, who will be the drivers of the recovery. (Small businesses provided 59% of private sector jobs in the UK in 2007).

Banking failures and failed rescue attempt
The report, IOUK: banking failure and how to build a fit financial sector, looks at the behaviour of the UK's banking sector. If finds that the nation's banks have withdrawn from the heart of communities, sidelined their basic business, lost touch with the real needs of their customers and become structurally unable to serve them, it says. While flooding the economy with inappropriate credit they contributed to a financial drought in disadvantaged areas and starved small businesses of the credit they needed to survive.

And the Government's rescue attempts have so far failed. Despite virtual nationalisation and a £37bn bailout of the biggest banks, the Government seems powerless to force banks to lend appropriately.

NEF says that The Enterprise Finance Guarantee scheme which replaced the Small Firms Guarantee Scheme has failed to kickstart lending (despite Lord Mandelson's claims in an announcement slipped out quietly on 20 February in response to media criticism) and is weighted in favour of larger firms.

Yet a "sleeping architecture" of a more robust local financial infrastructure exists in the credit unions, community finance and local enterprise schemes that are working on the frontline of financial exclusion.

The paper includes case studies of viable businesses failed by the banks but supported by this parallel infrastructure. The report's authors say that this sector should be supported and a UK Community Reinvestment Act be brought in to force banks to partner with them.

Comment from the author

Sargon Nissan, Business and Finance Researcher at NEFand co-author of the report, commented:

"The Bank of England has reached a dead end with interest rate cuts and the decision to flood the economy with £75 billion of new money through 'quantitative easing'; is just another form of bail out. The Government is in denial if it thinks we can go back to business as usual; that's what caused the crisis.

"If banks became too big to let fail, how can the answer be to make even fewer banks even bigger and keep channelling all the funds through them? We need to bring banks back to their original function, break them up and return them to a scale where they are in touch with the communities, people and businesses they should have been serving all along."

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Entrepreneurs seek to set up new bank to bypass crisis

A group of Cambridge entrepreneurs and businessmen are so outraged by the behaviour of the banks that they are setting up their own.

Telecoms guru Dr David Cleevely said: "We are sick to death of the way the banks are operating. They are offering people almost nothing for deposits but charging small businesses up to 15 per cent for their credit facilities. There is something fundamentally wrong." Dr Cleevely, the founder of Cambridge Wireless and Abcam, the world's biggest catalogue for antibodies, is working with a number of businessmen on plans for a bank serving depositors and commerce.

Read more at The Independent - click here.


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Help for small businesses

Various funds have been made available for small businesses:

Working Capital Scheme
£10 billion available to assist companies with T/O less than £500 million, who are having Working Capital Problems.
50% is guaranteed by the Government

Enterprise Finance Guarantee Scheme
£1.3 billion earmarked for loans to companies with <£25 million T/O and the loans are between £1,000 and 1 million!!

Capital for Enterprise Fund
£75 million (£50m from Government) enables companies urgenbtly needing a cash injection to sell debt in return for a stake in the business. Firms with a turnover of <£50 million will be able to obtain equity and quasi equity investment of between £250,000 and £2 million.

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