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businessupdate News…


Whereto find funding to helpyougrow?


Federation of Small Businesses Welsh Policy Unit Chair Janet Jones looks at the challenges and options for small firms in accessing finance


grow abusiness, take advantages of the opportunities that are out there, and create local wealth and employment. When it comes to small businesses and the self-employed the first port of call for borrowing has traditionally been, and remains, the local bank. But worryingly there is compelling evidence that small firms in Wales are the least likely in the UKto be able to get aloan from their bank manager. The Business Finance Taskforce commissions its own report into the state of borrowing to small firms across the UK. ThatSME Finance Monitor report makes grim reading for those who run small businesses here in Wales. It found that more than half of Welsh SMEs


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that applied for aloan (52 per cent) got no loan at all from their bank. The equivalent figure in Scotland was just 21 per cent and the figure for Northern Ireland was even lower at 12 per cent. The report found that Welsh SMEs had a


success rate of 65 per cent in getting an overdraft, compared toaUKaverage of 73 per cent. Only half of Welsh firms who applied got the overdraft they wanted. These figures are especially disappointing


when you consider the importance of bank lending to small businesses. The Bank of England and Treasury’s Funding for Lending Scheme may be starting to have an impact in bringing down the cost of business lending, but that is cold comfort if you are among the majority of Welsh SMEs that are turned away when they apply for aloan. Of course, just because the bank that you


have borrowed from in the past will not lend to you it doesn’t mean that you can’t look elsewhere in the banking sector. It is worth seeing what other high street banks might offer you and it may


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Whenitcomes to small businessesand the self-employedthe first


also be worth speaking to other businesses in your area to see where they have been successful in securing lending. There are also more recent entrants to theUK


banking sector such Aldermore and Swedish bank Handelsbanken which are worthy of consideration. The latter operatesamore traditional approach to banking, with decisions being taken at abranch level. But, given the problems with bank lending,


portofcallfor borrowing has traditionallybeen, and remains, the local bank. But worryinglythere is


compellingevidence that small firms in Wales are


the least likely in the UK to be abletoget aloanfrom their bankmanager


where else can small firms in Newport and the Gwent valleys look to raise finance? Obviously small firms can’t issue shares or bonds in the same way as large firms but there are some alternative ways to raise money. The use of peer-to- peer lending and crowd funding are increasingly being seen as new channels to raise finance. But one of the major issues


facing small firms is that such alternative sources of funding are not regulated, leading some to have concerns about raising funds in such away. Arecent report by the FSB recommended that theUK Government and regulators show the future importance of peer-to- peer and crowd funding models by engaging the p2p Finance Association along with key players in this market.Wewould like to see the key players brought into afully recognised regulatory environment that would help to attract agreater number of institutional investors to


meet the demand from small businesses. Once a suitable regulatory environment has been established, the Government could create investor accounts in the peer-to-peer firms that lend to small businesses and use this as an alternative route to the banks. The other major issue is that crowd-funding


and peer-to-peer lending may be more suitable for some forms of businesses than others. There are notable examples of software and consumer technology businesses raising funds through crowd funding to develop new gadgets or computer software, but some businesses might find it more difficult to raise money in this way. In Wales specifically, there is also an issue


over whether there is alarge enough base of sufficiently wealthy individuals to act as peer-to- peer funders. Aside from these alternative sources of


finance there are also anumber of investment funds run by the Welsh Government’s investment arm Finance Wales which are able to offer loans to small businesses. The most recent of these to be launched is the


new Property Development Fund which has a total of £10m of loans for small and medium-sized construction companies that are unable to access finance from traditional sources. The fund operates on acommercial basis and by recycling investment returns. For the smallest businesses Finance Wales


offers the micro-business growth fund which provides funding of between £1,000 and £20,000 for micro-businesses which have difficulty in accessing finance through other means. It also offers loans through the £40m-funded Wales SMEInvestment Fund.


Angela James, SueWigmore, Saskia Teagle,Clare Clements


Sarah Banwell, Sam Hughes, Dimitri Batrouni, JessicaMorden


GinaChadha,Harlaksh Singh, Shano Chadha


ne of the mostcommondifficulties that our members across South East Wales face is the difficulty in accessing finance. Without finance it is difficult to


Chris Evans; Vivek Chadha


Tuesday July 9, 2013


Out and about...


Frompage1–new gym opens at Clarence House, Newport.


Alex Riddell, TimParker, Mark Stevens, Steve Roberts, Dave Jones


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