News & Blog

Contact Us

New Small Business Lending Scheme

Bank lending for small businesses is in a tricky phase, with as many as one in three unable to secure adequate funding for their business needs. So, can George Osbourne reinvigorate small business lending with his new initiative? Even with the UK economy forecast to shrink further, he’s still looking to help the ‘innocent victims of the financial crisis’ – that is, the small businesses who are unable to find funding.

Though currently measures that have been put forward are a bit short on details, the scheme proposed is similar to those which have proved successful in Germany. Osbourne’s three previous attempts to solve the small business lending dilemma have failed, including Project Merlin – there is little choice but to try something different, somewhat thawing out the credit freeze.

The scheme is based on a small lending system back-stopped by the government. In the US, the Small Business Administration (SBA) operates in a similar way, and lent more than $30bn to 61,000 companies in 2011. It has been claimed that small businesses in the US account for up to half of all employment in the country, and have created up to 2 out of 3 jobs between 1993 and 2009 – so clearly this is a system with real benefits.

Critics say schemes such as this only go to create a financial drip for ‘zombie businesses’ that stifle real, innovative investment – however, this can’t explain why UK employment rose 0.7% in Q2 while measured output fell 0.5%. These zombie businesses are preferred by the banks who choose to keep low productivity businesses going.

Whatever this new lending scheme turns up, hopefully we’ll see some real benefit for the SME sector. Getting the right finance options for your business is essential if you want to develop your company – and if the government wants to boost the UK economy as a whole.

 

Related Posts

Leave Comment




Helping your business grow

Contact Us
Contact Us

|T 07578561997