Public Accounts Committee Calls For Greater Support For Small Firms
The Public Accounts Committee has urged the government to use the British Business Bank to form a more coherent programme for lending money to small and medium enterprises (SMEs).
A new report conducted by the body showed that schemes aimed at providing small companies with vital funding could be improved.
Banks became increasingly reluctant to sanction business loans during the financial crisis and many startups found it extremely hard to expand their operations as a result. To ease the situation, the government launched initiatives such as Funding for Lending, which has provided entrepreneurs with another option.
However, the Public Accounts Committee's latest study suggested these programmes have been set up on an ad hoc basis to address particular weaknesses in the market, but the government needs to establish clearer long-term goals for such schemes.
The report also found that funding initiatives have not met the needs of SMEs in certain sectors.
Chair of the committee Margaret Hodge said the amount of money being distributed via the Funding for Lending Scheme has declined by £2.3 billion since the project was first launched.
She added that loans handed out through the Enterprise Finance Guarantee dropped in number and value every year between 2010 and 2013.
In many cases, Ms Hodge remarked, the Department for Business, Innovation and Skills could have done more to raise awareness of the amount of funding options available to SMEs.
"Credit cards and overdrafts, though mostly more costly, remain the most frequently used financing options for SMEs who need working capital quickly," she commented.
"SMEs 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."
The Public Accounts Committee has also recommended that the government gathers and publishes as much data as possible that highlights how much financial support is filtering through to small organisations.
Expert Opinion
Small and medium-sized business are central to the UK’s economic future and it is vital that entrepreneurial owners have access to the finance they need so that they can realise their growth ambitions. <br/> <br/>“The Government has said that it recognises the importance of making finance more accessible, particularly at a time when the economy is showing real signs of improvement. It is of course important that the Government maintains funding levels and has a coherent approach that companies understand. <br/> <br/>“Once again we would urge SMEs to carefully assess all of the options open to them and also seek professional advice on finance issues too. This should include getting good quality legal support from advisers with a strong track record and proven understanding in their sector." <br/> Steven Beahan - Partner