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Govt agrees SME access to finance needs improving

Date Added: 29/01/2014  

It is no secret that one of the biggest obstacles small and medium-sized enterprises (SMEs) face is getting access to the right finance. 

However, it appears the government has now recognised the enormity of the issue and they are putting measures in place to allow small businesses to get the funding they need.

At a recent hearing, headed by Margaret Hodge, MP and chair of the committee of public accounts, the government’s failings were highlighted and recommendations were made to help SMES.

Ms Hodge said: “Small and medium-sized enterprises have a vital role to play in driving the UK’s economic recovery.

“But despite government attempts to encourage lending to SMEs many still struggle to access the finance they need.”

At the time of the review, overall lending to SMEs was down. Since the government-backed scheme ‘Funding for Lending’ was launched, net lending by participating banks has actually declined by £2.3 billion. 

The number and value of loans backed by the Enterprise Finance Guarantee fell each year between 2010 and 2013.

Members of the hearing concluded that although the government spends a large amount of taxpayer money to promote better access to finance for SMEs, it has been unable to demonstrate that its schemes have successfully addressed the market failures they were designed to correct.

Ms Hodge added: “Indeed far from encouraging more lending to SMEs, investment has declined.”

The committee recommended that the government ensures the British Business Bank draws upon the emerging evidence of the changing financial needs of SMEs. It must tailor interventions accordingly, implementing, refining or withdrawing schemes as circumstances change.

It also advised that the government must make SMEs fully aware of the funding options available to them and it should use its influence in the mainstream banking sector to ensure high street banks understand the needs of their local businesses in order to encourage an increase in lending.

These, and the other recommendations made by the committee should help SMEs gain access to the finance that some desperately need to grow and prosper.

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