Will the new government funding scheme lend cash-strapped SMES a hand?

Is the government’s latest attempt to get banks on board with SMEs going to make a difference?

Will the new government funding scheme lend cash-strapped SMES a hand?

Last week, Vince Cable, the business secretary, unveiled yet another plan to try and boost bank lending to SMEs. It comes at a time when Britain’s small businesses are increasingly looking to alternative forms of finance, having grown frustrated at being knocked back by Blighty’s age-old financial institutions.

This latest scheme will see the British Business Bank – launched by the coalition government last year – share the risk of some of the loans made by banks to small businesses. Cable claimed it would particularly help ‘challenger’ banks lend to smaller companies, enhancing the growth prospects for banks and SMEs alike.

But is this really what’s needed to ease small businesses’ lending woes or will it fall flat like previous schemes? Here’s what those at the coalface think of the proposals.


“Banks must be more flexible”Richard Prime, co-founder and CEO, Sonovate

It’s good to see the government adopting alternative measures to encourage banks to lend more and crucially become less risk averse. This is especially important after the failure of the Funding for Lending Scheme – let’s face it, the concept of matched funding was never going to work when there are no funds to match in the first place. 

But whether the new scheme under the British Business Bank will result in more lending or not, the issue remains that if UK banks continue to sell their outdated and inflexible products to SMEs on the assumption that it is simple and it works, we are still in a position where the growth of UK SMEs will be stifled. The banks don’t understand the unique requirements of small businesses; they don’t offer enough flexibility to accommodate for their fast-growing nature and the information is just not available to help small businesses understand what they are actually getting into. 

It’s not that the banks are misleading, but their off-the-shelf products that might look good on paper are not always the most sensible option for the small business in question. Until this changes, schemes like the British Business Bank will continue to be redundant.


“A very welcome initiative”, Julia Elliott Brown, co-founder and CEO, Upper Street

I’m very supportive of any initiative from the British Business Bank designed to work alongside other providers to open up more routes to finance for small businesses in the UK. Upper Street is already a grateful benefactor of another British Business Bank programme, the Aspire Fund. The £12.5m Aspire Fund provides support to women-led businesses by making equity investments of between £100k to £1m alongside private investors. This initiative was great for small businesses like us. Not only did they come into our venture as a co-investor providing us with £250,000 investment in February this year, but their network of connections also allowed us to meet other investors who fit in well with our business. 

The funding from Aspire has enabled us to build up the Upper Street team, redesign the website onto a brand new technological platform, relaunch our product range, open a shoe lounge in London and acquire a US competitor. The Aspire Fund is just one of the things the British Business Bank does and from our experience, it demonstrated a long-term commitment and interest in the future of our business. 

The fact remains that the ways in which businesses can get financed is shifting radically and the British Business Bank’s intention to foster more financing options for start ups is something I welcome. 

Adam Pescod
Adam Pescod

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