January 6, 2010
Filed under: Loans — Alan @ 7:00 am
The Government has pledged to charge a premium of 2pc for the Enterprise Finance Guarantee (EFG) after the EC state aid rules expired.
The rate charge will affect about 5,800 loans that already exist that were drawn up for companies and an additional 3,000 loans that were previously approved by the Business Department.
The news follows revelations that were published in The Daily Telegraph that banks have been able to get about £6m in fees by making SMEs pay inflated rates in order to get access to the scheme which is valued at £1.3b
Research discovered that the companies that chose to drawn down their loan agreements were forced to pay about 1.8p% of the loan in administration fees and also accept an increased rate of interest set at 6.75%.
In response SME groups called for the mater to be investigated with FSB, member Stephen Alambritis commenting that the scheme should be the cheapest option for businesses and that the government needs to investigate the charges.
The new increase in the premium will add an increased cost to obtaining a loan for a businesses, which has been extended up until 2011 with £500m set aside for guarantees.
A spokesman for the Department of Business stated that the discounted premium was only temporary, and could only be offered during the time period when it was still uncertain about how much it would cost for SMEs to get financing. According to the spokesman the government always planned to return the premium back up from January of 2010.
December 14, 2009
Filed under: Loans — Alan @ 7:01 am
A new poll suggests that Enterprise Finance Guarantee or EFG may perform poorly due to a lack of publicity. The EFG is the new initiative by the Government that was created to help SMEs get through the economic recession in the UK. However, research denotes that the effort was a flop.
A poll conducted by Clifton Asset Management showed that out of the 1,000 SMEs polled; only about 37% of the managers had heard of the EFG. Of the 63% of managers who had heard about the effort, 89% stated that it would not help them to apply for help.
The new figures from the study were announced directly after Alistair Darling the Chancellor stated that the scheme worth £1.3b would be extended to help stimulate lending by banks for loans that are under £1m. It has been extended past its March 2010 by six months.
The Treasury stated that the scheme was an important funding source for businesses after the bailout of the banking industry.
Director at CAM, Anthony Carty, stated that their figures show that in just a quarter the amount of SME managers who knew about the scheme reduced by a 5% margin.
On the other hand, Business Secretary Lord Mandelson told the House of Lords that so far the EFG has been able to secure 6,855 SMEs with loans that amount to about £692m.
Carty stated that while the figures are encouraging, the study shows that the scheme is still not as effective as the Government claims.
December 3, 2009
Filed under: Loans — Alan @ 8:39 am
Yesterday, the government embraced the report findings that called for an additional fund to help fill the gap left in funding for SMEs that are growth-focused.
The report which is referred to as the Rowlands Review and was headed by Chris Rowlands, a member of the Principality Building Society; shows that market failure is common for SME’s who need financing for growth in the up to £10m range.
Officially the report is titled the Provision of Growth Capital to UK SME’s and shows that the gap in funding is not because of the recession, but because funding due to structural lending is usually much easier to get in the bracket below £2m and in the bracket above £10m because of higher venture capital activity.
The report also states that SMEs would have better chances of finding funding in a solution where the finance can be turned into equity later instead of through straight equity or debt finance conventional solutions.
Additionally, the report adds that SME growth works best with mezzanine finance due to the fact that it is middle ground financing that is not high risk and holds the possibility for a high return.
Currently the research from the report estimates that there are anywhere between 25,000 UK businesses and 32,000 businesses that would benefit from the additional funding options that would allow them to proceed with capital growth.
Rowlands stated that the review shows that the provision of capital to SME’s appears to be permanent which is why the UK needs to act to help these businesses out as they try to come back out near the end of the recession.
November 18, 2009
Filed under: Loans — Alan @ 5:56 am
Even though £200bn has been added to the UK financial system by the Government, small and medium sized businesses are still have problems finding finance a report by the British Chambers of Commerce stated.
According to the report, about a third of all companies included in the survey said that they had a harder time finding finance access within the last three months. Out of those questioned, 3% said the finance situation had improved while an overwhelming 64% said that it had not changed.
Director of the BCC, David Frost, stated that their survey showed that the largest issue still facing British SMEs is high demand for services and products. He continued to state that it has become clear that despite the government’s attempts to pump money into the financial system the efforts are not aiding SMEs in finding funding.
This is especially true for businesses looking for money to aid expansion or future success.
Frost also called for the government to consider implementing a new set of measures that will help increase the confidence felt towards SMEs by the UK public. He stated that a great place to start would be by scrapping the increase in National Insurance that is planned for 2011.
Despite the concerns over finance, the report showed that the largest problem is actually the lack of customer demand in holding businesses back from expanding instead of trouble finding finance.
The BCC survey questioned 400 firms about their viewpoints on the lending situation that exists currently in the UK.
November 11, 2009
Filed under: Loans — Alan @ 7:37 am
A new study shows that about half of all small businesses have managed to stay profitable in the face of the recession. The report comes in the wake of recent criticism from Lord Sugar, who stated that small companies that are struggling are simply ‘moaners.’
According to the study, which was completed by Kingston University, most small businesses have been able to get through the recession by using their own cash instead of loans and financing options from banks.
The results also showed that out of 343 firms surveyed, only about 25% of the SMEs saw their profits fall significantly.
The new finding is said to be a direct contradiction to the common thought that SMEs suffered considerably during the downtown. The study also showed that most SMEs that survived did so with the use of their owners own credit cards and savings accounts.
This proved that SME business owners were forcibly able to adapt to meet the new business conditions and terms of the past year.
The comments from Lord Sugar, the enterprise champion of the Government, in Manchester last week, publicly stated that many of the SMEs that are whining about poor financing opportunities are companies that even he would not loan to.
November 10, 2009
Filed under: Loans — Alan @ 7:12 am
The new 2012 SME charter is aimed at addressing the complaints of both medium and small enterprises to help aid them find finance options despite current difficulties over securing finance.
The new commitment also aims at making strides to fulfil pledges made by Government to SMEs that will ease the constraints on SMEs from the recession and make recovery easier.
Lloyds stated that new charter will aid customers from the Royal Bank of Scotland and Lloyds TSB and will inspire discussions with Government ministers that will encourage all SMEs to getting better access to finance in exchange for agreeing to offer fairer pricing to its customer base who have a turnover of at least £15m.
Currently the group has around 18% of the SME market in Wales and England which places it behind the RBS and Barclays in the marketplace. Earlier attempts by the charter to drive up its SME customer base were limited due to the fact only businesses that were able to offer a turnover of under £1m were considered.
As part of the new charter the group will offer much stronger backup for about 300,000 start-ups and will also increase the amount of seminars that it offers from 120 to 200 per year over the next three years.
The aim of this charter is to provide online and personal guidance for SMEs that are just starting up and need aid with sustainability, finance, and employment.
Lloyds is also offering to guarantee that they will meet the finance needs of every reasonable request from customers that are deemed viable.
October 21, 2009
Filed under: Loans — Alan @ 8:30 am
The latest Quarterly Credit Conditions Monitor by the British Retail Consortium reported that business members have been impacted severely by the withdrawal or reduction of trade credit insurance.
Most respondents additionally reported that they do not believe trade credit insurers accurately assess risk levels with 74% of SMEs responding to this claim and 92% of large retailers.
An anonymous retail company commented on its survey form that trade credit insurers need to take more time to look at a business specifically instead of simply looking at the umbrella category it falls under and stating no.
The commenter continued to say that risk assessors often simply refuse coverage because it is easier than aiding the insured company.
Currently, the BRC has called for an extension on the top scheme cover period that would stretch back to April 1, 2008, which is when insurers started to reduce the amount of businesses they covered as a result of the economic downtown.
Initially the credit insurance scheme was used in April of 2009 by the Government in an effort to allow businesses to buy credit cover with their insurance providers, and extends back from Oct. ,2008 reductions.
However, the new survey from the BRC shows that 95% of all SMEs do not feel as if this time period is long enough. And that extended the eligibility time frame will help solve problems that are currently faced by SMEs.
Additionally, many retailers also believe that the scheme should be extended past Dec. 31st when it is slated to end.
October 16, 2009
Filed under: Loans — Alan @ 6:31 am
The RBS, or Royal Bank of Scotland, has responded to pressure from the Government to increase its SME business loans, by setting up a hotline tailored at helping small firms get approved and access to loans.
Both the RBS and fellow bank Lloyds have come under fire by the Treasury lately, for offering interest rates on loans that are so astronomical SME owners have been afraid to touch them.
The banks defended their position saying that it is hard for small firms to compete with larger companies as everyone is looking to stay out of further debt during the recession.
The Chairman of the small business department at the RBS, Peter Ibbetson, said that the new Business Hotline will be open for all small firms to utilize, even those that may not be customers of the bank.
He said that this way all businesses get a fair hearing, and small firms that feel they should be reconsidered after being passed by, can get the chance to be re-investigated.
According to Ibbetson the bank approves about 85% of all loan applications at the moment, and is always looking at ways that they could increase the lending approval figure.
October 13, 2009
Filed under: Loans — Alan @ 7:58 am
The RBS and Lloyds Banking Group are currently under investigation by the Government after allegations surfaced that the two groups may be purposely increasing loan costs to small business enterprises.
An unidentified source from the Government stated that investigators are not focused on forcing the banking institutions to make uneconomic loans, but current research shows that they may be increasing the price of credit past realistic levels.
Both banking institutions are members of the Government Asset Protection Scheme, under which they agreed that they would lend an increase of £39 billion in loans to SME’s above the previous norm.
Although both of the banks will be able to reach the target of mortgage loans by March, the banks have admitted the same target will not be achievable in terms of corporate lending.
At the same time as the investigation, SME’s have also reported an increase in anxiety when it comes to finding loans.
September 26, 2009
Filed under: Loans, Small business — admin @ 11:08 am
Following the British Government’s rescue of two of the biggest financial institutions, the Federation of Small Businesses in Scotland is now voicing concerns over a strangling domination of the business banking market. In particular, the FSB have made clear their uneasiness over a monopolisation in business credit for small to medium enterprises.
The RBS Group and the Lloyds Banking Group, both having required substantial bailouts and effective nationalisation following poor decisions in business acquisitions, have been accused of forging a duopoly within the Scottish credit sector for SMEs. There is now growing disquiet surrounding the issue of a dilution of credit choice for small business owners when it comes to banking.
Further to the possible ramifications of this for SME, there have been calls for the government to aid the reputation of banks that did not require such high-profile bailouts. The director of Debt Advisory, Neil McDaid, asserted that there was a lingering distrust in banks combined with an inversely anticipated increased loyalty, meaning that the introduction of competitor brands and products in capital lending to SMEs would become increasingly difficult.
He commented: “The availability and cost of bank debt continues to be a problem for businesses, and an obstacle to economic recovery. The lending commitments of the state-owned banks have failed to make a significant impact on borrowers so far.”
Whilst this may prove to provide the groundwork for an analysis of future business lending pending a continued commitment in the wake of economic recovery, there have been warnings that a moderating influence on the release of credit, as displayed by the cautious activity of the Scottish duopoly could be beneficial. Peter Jones has this week spoken with caution about a substantial credit influx, which would result in the perpetuation of toxic debt and debt solutions in companies with poor business models.
“If you open up the doors and credit opens up too fast, all that’s going to happen is the businesses that are going to be saved, on occasion, will be the businesses that probably do not deserve to be around.”
Small to medium enterprises, it seems, are now under increasing pressure to secure credit in an economic environment that neither suitably facilitates negotiation in essential credit nor aids in providing contingencies when dealing with Individual Voluntary Arrangements or Protected Trust Deeds when they struggle to repay inflexible debts they had no choice in taking out.
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