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New legislation could transform SME funding landscape says LTF


New legislation aimed at opening up the SME finance market could transform the funding landscape for businesses across the South East, according to Mike Yiannis, CEO of Henley-based Legion Trade Finance (LTF).


Set to become law in the next few weeks, the Small Business, Enterprise and Employment Bill aims to compel banks to match businesses which have been turned down for loans with alternative finance providers.


According to research, most small businesses stop looking if they are turned down by the first funder to whom they apply – in most cases, their bank.


Every year an estimated 250,000 SMEs who would like finance are told that they don’t meet the banks’ criteria. Just 6% of those who are declined finance are then referred to alternative funders, and just a further 11% are then offered alternative funding or advice.


“Despite much-trumpeted initiatives such as the Enterprise Finance Guarantee, official figures show that funding to small businesses continues to fall,” said Yiannis.


“These businesses are the engine room of the economy but they aren’t tapping into the alternatives, very often simply because they aren’t aware of them.


‘Mansion tax is outdated and unnecessary‘


New research published by the Centre for Policy Studies reveals that any case for a mansion tax is now redundant as recent tax reforms have significantly increased the tax burden on higher-value properties.


The Shrinking Case for a Mansion Tax by Lucian Cook, director of research at Savills, shows that properties that would be targeted by a mansion tax have already been subjected to significant tax hikes since the policy was first mooted five years ago.


Recent stamp duty land tax reforms have increased the tax burden on ‘mansions‘ by £1.1 billion – the top 1.6% of households now pay almost half of all SDLT.


The introduction of, and recently- increased rate of, an annual tax on enveloped dwellings has added at least another £100 million a year to the tax paid by ‘mansionism‘, closing the loopholes which existed when the mansion tax was first proposed.


As an example, the tax paid on a house now being sold in SW London for £2.5 million has increased by 405% since 2009.


Cook commented: “The recent reforms of property taxation are raising as much from high-value properties as any mansion tax. If in addition to these reforms, a mansion tax were introduced, it would add a layer of complexity and unfairness into the tax system for residential property. The economic impact of a mansion tax is impossible to quantify but would clearly be damaging, not least in seriously undermining the attraction of the UK to overseas investors.“


Tim Knox, director of the Centre for Policy Studies, commented: “For economic recovery, the UK does not need new taxes targeted at the aspirational, the successful and sometimes the fortunate. Rather, it needs lower, simpler taxes which encourage innovation and productivity and which stimulate, not penalise, wealth creation.“


THE BUSINESS MAGAZINE – THAMES VALLEY – MARCH 2015 www.businessmag.co.uk


“However, it can also be a question of credibility. Despite everything that has happened in the financial services sector in recent years, businesses know the banks aren’t going to disappear overnight and they are often more wary of alternative funders.


“A trusted system whereby banks themselves recommend businesses to funders who can help them would change this perception.”


Yiannis says that alternative funding is also moving into the mainstream, with online alternative lenders having provided around £1.6 billion in finance to small businesses last year.


“These ‘alternative’ funders then, along with the growing number of so-called challenger banks, are becoming both better-known and more trusted. Such credibility is critical for a referral system to work,” he said.


“The Small Business, Enterprise and Employment Bill is a welcome acknowledgement of the crucial role played by SMEs in the economy, and it is encouraging that alternative finance is not only being addressed, but also advocated by the Government.


“Now we need to foster a supportive mindset, not only in Westminster, but also among the banks, alternative financers and investors alike. Taking the ‘alternative’ out of ‘alternative finance’ and nurturing a sense of collective responsibility for UK business growth will not only save SMEs time researching their options, but it may also deter them from giving up at the first hurdle.”


Details: www.legiontradefinance.com


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