Pictured: Dr Geoffrey Davies OBE
Businesses in the Marches 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 yesterday.
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.