Other sources of funding
Feb 10 2009 By Steve Walker
The ongoing debate in finance still appears to centre on whether banks will or will not lend.
A number of schemes have been introduced by government to encourage lending and the focus is moving towards high growth businesses and larger companies in the belief smaller businesses are provided for.
But are they? My view is yes, but not in the way the Government, or many of the businesses themselves, seem to think.
Bank loans are not the only way for smaller businesses to access finance and for some are not going to be the answer, even with the latest government initiatives. There is no doubt the banks want to lend to businesses, but – especially at the moment – it has to be for straightforward, low-risk propositions. There are alternative lenders designed to take higher risk and sometimes a package of finance can be provided by these and the banks working together.
Businesses in the West Midlands are particularly well provided for, thanks in no small way to the efforts of the regional development agency, Advantage West Midlands (AWM), which has worked for years to support a finance sector to ensure access to finance for businesses of all sizes. Special loans schemes, Business Angels, specialist invoice discounters and asset financiers report that they currently have funds available for small businesses. For details of the full range of options available see www.westmidlandsfinance.co.uk.
Some funders are looking to achieve a return other than profit – usually job creation or protection. Community Development Finance Institutions, like the Mutual (one member, one vote) ART (Aston Reinvestment Trust) – targeting Birmingham and Solihull – were set up with this objective, precisely to lend when the banks can’t help. Their resources have in some cases recently been enhanced by public and private sector support, so they have more money than usual available to lend immediately.
In the wider West Midlands, with support from AWM, members of the Fair Finance Consortium (www.fair-finance.net) cover the whole of the region providing loan finance to enterprises up to £50,000. They have seen a trebling in value of loans delivered in the last quarter of 2008 compared to last year. These independent organisations are social enterprises and provide a real alternative at the lower levels to banks, who despite increasing pressure are most unlikely in the current climate to find lending to the smaller business community an attractive or profitable exercise.
So, dare I say it, the ‘green shoots’ are there for smaller businesses, but the problem now seems to be a lack of confidence that there is any money available to apply for and a lack of understanding about the wide range of alternatives that exist if the banks can’t help.
The challenge, in my opinion, is for all businesses and those that support them to seek out the opportunities and grab them now. It should not be for lack of funding in this region, that small businesses with a viable proposition fail.
n Steve Walker is from ART (Aston Reinvestment Trust).