sources of finance
To help increase access to funding during the recession, we have
introduced the Capital for Enterprise Fund, a scheme to help
“
finance SMEs with high levels of debt which have exhausted other
traditional means of finance.
”
exhaust repair centres: the accepted definition included multiple sessions on the subject, in-
can take in businesses with close on 250 staff. cluding one on ‘the financial limitations on
The definition of ‘SME’ is now so broad that the smaller organisation’.
there are in effect many tiers within that range, The Small Firms Loan Guarantee Scheme
from sole trader consultancies employing no which appeared around a decade later had
staff at all, for example, to sizeable enterprises faults in its concept but generally helped a
operating as a group of trading companies and large number of businesses raise the kind of
touching the upper limit of SME status. finance needed. The banks took minimal risk
as even the 25% being covered by the bor-
Simplified reporting for SMEs
rower were effectively covered by personal
guarantees.
Accepting that there are now simplified re-
porting requirements for small businesses, and
cut-off points below which disability and other
Business angels and private funds
quotas do not apply, a problem is that these Before the recession started to bite hard on
boundaries are all set at different levels. the smaller business sector, company owners
A business which is below the barrier in one were not adverse to seeking capital injections
area is treated as a ‘larger’ SME for other pur- from private business funds set up for the pur-
poses. It could be argued that what confuses pose, and a breed of individuals collectively
the SME is the uncertainty over what band known as business angels.
they fit into for different purposes. Could a case In the absence of significant bank finance,
be made for a more formal tiering of the 4.7 mil- the number turning to business angels for top-
lion SMEs to ensure that the services provided up funds is increasing, even though the total
under the ægis of Whitehall really did ‘fit’ the pot available has not increased in proportion.
businesses they were intended to assist? There is growing evidence that third parties
Mr Jackson maintains that SMEs have are selecting only ventures with minimal risk,
already been placed in bands for practical pur- while in a position to extract increasingly un-
poses. “We split small businesses into narrower favourable terms from the entrepreneurs ap-
sub categories depending on the number of proaching them.
employees involved - micro (0-9 employees), Adam Jackson does not see business angels
small (10-49), and medium (50-249). in quite the same light. “They can bring value
“We have also identified the difficulties that to an investee company through management
small firms with fewer than 20 employees and financial skills, and access to new mar-
have in dealing with the level and complexity ket opportunities.
of regulations. That is why, in last year’s En- “We support the British Business Angel As-
terprise Strategy, we set out our commitment sociation (BBAA) through a three year strate-
to improving the way new and existing regu- gic grant. We work on a broader front with busi-
lation applies to such firms.” ness angel networks to try to improve data on
the scale and range of this sector.”
Finance for the SME
“To help increase access to funding during
the recession, we have introduced the Capital
Financing the smaller business has always for Enterprise Fund, a scheme to help finance
been a problem. The small firms course which SMEs with high levels of debt which have ex-
was highlighted at the start of this item hausted other traditional means of finance.
A business which is below the barrier in one area is treated as a ‘larger’ SME for other purposes. It could
be argued that what confuses the SME is the uncertainty over what band they fit into for different purposes.
The Informed Executive
69
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