FSB warns against high street banks holding small business monopoly

The Federation of Small Businesses (FSB) is challenging a potential monopoly of power being built up by high street banks over small firms seeking finance, two years after the credit crunch started.

The FSB is warning that bank mergers, recapitalisation and schemes targeted at the big banks to stimulate lending as a result of the banking crisis risk stifling choices of finance for small firms - leaving business owners with nowhere to turn if they are refused credit by the major high street lenders.

With a quarter of small firms still struggling to access affordable finance, the FSB believes the power of the financial sector should be challenged to guarantee a fair service for small firms. The FSB proposes:

- Struggling banks should not be sold off to other high street lenders as this would create massive institutions which could stifle competition in the financial sector;

- Alternative sources of finance should be provided locally. Regional Development Agencies should be restructured to offer loans and Essex County Council's Bank of Essex model should be replicated around the UK. The Enterprise Finance Guarantee and funds already allocated from the European Investment Bank could also be offered via these routes.

- The Post Office should be turned into Post Bank offering support for small firms by utilising the Post Office Network and operating either as a solely state owned bank or as mutual or trustee bank.

- Financial Intermediaries, recently created by the Government, should be actively promoted to viable small businesses unable to access finance.

Read more: http://www.fsb.org.uk/News.aspx?loc=general&rec=5496

Source: Federation of Small Businesses

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Treasury wants banks to increase loans to small businesses

In an attempt to persuade UK banks to lend more money to small businesses, the CEOs of major UK banks were summoned to a meeting with Alistair Darling and Treasury officials.

It's clear the Government is distinctly unhappy with the way banks are acting at present. It feels the banks have reneged on an agreement, reached as part of their rescue deal, that they would continue to lend to small businesses at a certain level.

"Money and insurance provided by the Government should ensure banks lend at the level they agreed to", said a Government spokesperson.

But when the Government agreed to save RBS and Lloyds Banking Group with an injection of £37 billion of taxpayers' money and insurance guarantees of some £600 billion, it seems they failed to stipulate the level of interest the banks charge for loans to small businesses.

So despite the Bank of England base rate being at a record low of just 0.5%, and LIBOR under 1.0%, when banks do agree to lend to small businesses they are typically charging interest rates of between 6% and 8%.

Some banks are also accused of turning small businesses away from loans under the Enterprise Finance Guarantee scheme, forcing them into other, more expensive loans that are more profitable for the banks.

After meeting the bank bosses Alistair Darling told reporters, "While in some areas there have been improvements, in others there is an awful lot more to do. I think in relation to small and medium-sized enterprises, we need to be satisfied that the lending agreements entered into are honoured and that every single business gets a fair deal,"

In response to the meeting, Shadow Chief Secretary to the Treasury, Philip Hammond has called on the Government to “stop talking and start acting” in order to get banks lending to businesses again.

“After all the fuss and fanfare around today’s meeting, the outcome will not make one jot of difference to struggling businesses up and down the country”, he added.

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Green Grants Machine

Designed to help small business owners like you find funding to make the small changes that can make a big difference where the environment is concerned.

Green Grants Machine is the UK’s most comprehensive source of information on grants, loans and awards available to help your business go green and save on energy bills.

Their completely free directory contains information on over £1.2 billion of funds available to help you... purchase hybrid fleet vehicles, install solar panels, introduce a recycling scheme in the workplace or to invest in green packaging to name just a few.

So why not run a search now and find out what money you could be eligible for?

Find funding now!

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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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Government aims for £1 billion venture capital fund to the businesses of the future

The Prime Minister has announced the creation of the UK Innovation Investment Fund to invest in technology-based businesses with high growth potential. The new fund will focus on investing in growing small businesses, start-ups and spin-outs, in digital and life sciences, clean technology and advanced manufacturing.

The Department for Business, Innovation and Skills, with the Department of Energy and Climate Change and the Department of Health, will invest £150 million alongside private sector investment on an equal basis known as pari-passu.

It is the Government's belief that this could leverage enough private investment to build a fund of up to £1 billion over the next 10 years. The UK Innovation Investment Fund forms part of the Government’s strategy for Building Britain’s Future.

Gordon Brown said:

“This fund will help build Britain’s future by investing in key sectors. It will provide crucial support for our most promising start-ups and existing small companies just when they need it most. Venture capital finance is the lifeblood of innovation and crucial to ensuring the commercialisation of the discoveries coming out of our research base. The fund will boost future UK competitiveness.”

Lord Mandelson, Secretary of State for Business, added:

“In our New Industry New Jobs strategy we identified access to venture capital as one of the critical factors in developing innovative new companies in Britain. The UK Innovation Investment Fund will be a shot in the arm for the British venture capital industry. It is also a challenge to UK venture capitalists to follow the Government’s lead in backing British entrepreneurs in building exciting new companies, investing in new technologies and creating jobs.”

Science and Innovation Minister Lord Drayson, who has been a champion for the fund, added:

“We must safeguard the Government’s record investment in the science and research base over the past decade. We cannot afford to lose out on the wealth this investment can yield and we will need this wealth to continue our sustained investment in research.”

Simon Walker, CEO of the British Venture Capital Association (BVCA), said:
“The BVCA is immensely encouraged by this venture capital initiative. The model that has been adopted is one which we have championed in our work with the Government leading up to this announcement. The UK Innovation Investment Fund offers an exciting economic incentive for more than a thousand young venture-backed companies and the ideas and jobs which they represent.”
Richard Pelly, Chief Executive of the European Investment Fund (EIF), said:

"EIF has been working together with the UK Government, the BVCA and other significant players in the Venture Capital sector in the preparation of this welcome new initiative, and is delighted to support its launch today.

“At a difficult time for the VC industry the UK Innovation Investment Fund will underpin a next round of critically important fundraising for Fund Managers, and EIF looks forward to continuing to contribute its extensive experience to the development of this process."

The UK Innovation Investment Fund will operate on a Fund of Funds structure which means it will not invest directly in companies, but rather invest in a small number of specialist technology funds that have the expertise and track record to invest directly in companies. The fund will provide a cost effective solution that provides a market return to both private sector investors and HM Government.

The Prime Minister is today publishing a plan for Building Britain’s Future. It is a radical vision for a fairer, stronger and more prosperous society. Public service entitlements will for the first time be guaranteed to parents, patients and communities. New measures, such as the UK Innovation Fund, will also drive economic growth and create jobs.

URL: http://www.hmg.gov.uk/buildingbritainsfuture

Source: Department for Business, Innovation and Skills

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EU unveils micro-credit plan for small businesses

The European Commission unveiled plans to free up 100 million euros (142 million dollars) from the EU budget to provide credit to people wanting to set up small businesses.

When supplemented by funds from international financial institutions like the European Investment Bank group, the Commission said, around 500 million euros would be available for micro-credits.

The plan could help people struggling to find money because they are too young, have been unemployed or due to the credit crunch sparked by the global financial and economic crisis.

"This new facility will extend the range of targeted financial support to new entrepreneurs and help them to overcome the squeeze on credit," Commission President Jose Manuel Barroso told reporters.

Read more: http://www.eubusiness.com/news-eu/1244044932.35

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Business lending remains weak

Lending to businesses remained weak in April, according to the Bank of England's Trends in Lending report. In particular, lending to firms in the wholesale and retail trades and the manufacturing sector fell sharply over the past year. The report also highlighted that approval rates for lending to small and medium-sized businesses are falling but added that some lenders are expecting availability of credit to improve over the next three months.

For more on this story go to:
http://www.bankofengland.co.uk/publications/other/monetary/TrendsApril09.pdf


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How to attract investors to your business

As access to 'traditional' sources of credit continues to be a problem for many small companies, 'alternative' sources of finance are becoming more attractive for many small business owners.

Before the banking crisis, most small companies could reply on their banks to provide borrowing facilities. These days, not only are borrowing terms less favourable than they were, but some banks have been arbitrarily slashing overdraft limits for businesses which are deemed to be 'risky bets'.

Alternative forms of finance include factoring (to free up the value of your invoices for a fee), and public sector initiatives such as the Enterprise Finance Guarantee Scheme (which has had mixed reviews to say the least).

As savings rates and stock market yields have tumbled in recent months, many investors may also consider investing in small businesses.

This form of investment presents an opportunity for small businesses seeking working capital or replacement to bank debt. It is more stable as capital cannot be withdrawn - whilst bank debt may be pulled at short notice.

At the same time, many small companies will benefit from the valuable advice and support that experienced investors can provide.

Here are some of our most popular guides to attracting investors:

Essential facts about business angels
http://www.bytestart.co.uk/content/finance/funding/business-angels-finance.shtml

Business plans for business angels
http://www.bytestart.co.uk/content/businessplans/30_2/business-angels-plan-1.shtml

How to secure business funding for start-ups http://www.bytestart.co.uk/content/finance/funding/business-funding.shtml

Source: Bytestart

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The Carbon Trust is offering £100m worth of interest free loans to SME businesses who invest in energy efficient plant and machinery

The scheme will be open to those looking for between £5,000 and £200,000, with the money being given out over the next two years.

“The size of the loan offered and its repayment period will be based on your projected CO2 savings, which will be assessed by the Carbon Trust,” explains the trust’s website.

Impressively, the application process has been sliced down to an average 10 days (the 763 businesses who secured loans last year had to wait four to six weeks). This is a far sight less time than the three to four months grants and other government-backed finance often take.

“Come and get it”, said Hugh Jones, director of solutions at The Carbon Trust. “There’s always been financial benefit from carbon saving but we are bringing it closer to home by offering the money interest free.”

The government increased the trust’s loan fund in this year’s Budget, meaning around twice the number of businesses should now be able to access the loans.

Tom Delay, chief executive of the trust, pointed out companies could reduce their energy costs by up to 20% by investing in energy efficient plant and machinery.

Find out more here: http://www.carbontrust.co.uk/energy/takingaction/about-loans.htm

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£50m European Investment Fund available for technology companies

Michael Birch has joined forces with Lastminute.com co-founder Brent Hoberman to launch an investment fund aimed at putting European tech start-ups on an equal footing with their US counterparts.

European Founders Capital (EFC) will provide an initial £20m of funding to early-stage tech companies, rising quickly to £50m.

Birch, who sold social network Bebo to AOL last year for £418m, intends EFC to bridge a funding gap that’s previously limited the development of European tech businesses, and catalyse a US-style eco-system where tech entrepreneurs actively look to reinvest in emerging companies.

“We aren’t taking institutional money. All the money comes from founders; people who have done it before,” Birch told today’s Sunday Times.

Birch and Hoberman say EFC will fill the funding gap between business angels who typically invest between £50,000 and £250,000 and VCs, which tend to invest £1m-plus into ideas beyond initial concept stage.

They’re joined by Peter Dubens, who built up the Pipex broadband business sold to Tiscali for £210m in 2007 and Hoberman’s old friend Rogan Angelini-Hurll, the former city analyst who an turned down the chance to co-found Lastminute.

According to Hoberman, who more recently co-launched interiors site MyDeco.com, there couldn’t be a better time for EFC to launch: “We are going to see some great, disruptive companies coming out of this downturn,” he said.

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New SME funding - EFG Scheme

It has been announced that as of the 14th of January 2009 until March 2010 there is going to be an new initiative called the Enterprise Finance Guarantee (EFG) Scheme which will assist businesses with a turn over of up to £25 million with a loan of up to £1 million, 75% will be guaranteed by the Government and 25% will be unsecured and at the banks’ risk. This will of course be based on the applicants meeting certain criteria and for companies that are creditworthy.

There are some very interesting changes to this scheme compared to the Small Firms Loan Guarantee Scheme as the SFLG could not be used to cover debt; many of our clients seek a way of consolidating various debt lines that they have and this was impossible to do with the old scheme. At first sight the sector industries that are ineligible seem to be greatly scaled down, we will of course have to wait to get final information.

What is EFG Scheme?

This is the Government's new £1bn Enterprise Finance Guarantee (EFG) Scheme will support up to £1.3bn of new lending by banks to eligible SME’s with working capital or investment needs.

Which companies will benefit from the scheme?

The EFG Scheme is going to be open to businesses with an annual turnover of up to £25m, seeking loans of £1,000 to £1m, which can be repaid over a period of 10 years.
Most businesses in most sectors will be eligible for the scheme. However, state aid rules exclude businesses in the agriculture, coal and steel sectors

What sorts of lending will this cover?

The guarantee can be used to support refinance existing loans, new loans or to convert part or all of an existing overdraft into a loan to release capacity to meet working capital needs.

How much of the loan is the Government going to guarantee?

The Government will guarantee 75 per cent of the loan.

How long will the scheme run for?

EFG will be available from Wednesday 14 January 2009 and will be available until March 2010.

Who are the participating lenders?

Barclays
Clydesdale/Yorkshire Bank
HBOS
HSBC
Lloyds TSB
RBS/Natwest
Northern Bank


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