Cash backing for small firms

Jan 20 2009 by jez Davison, Evening Gazette

WILL the Government’s multi-billion pound rescue package, announced last week, finally unblock lending to small firms hit by the financial crisis?

As part of plans to guarantee up to £20bn of loans to SMEs, an Enterprise Finance Guarantee will secure up to £1.3bn of additional bank loans to small firms with a turnover of up to £25m.

In addition, a £75m Capital for Enterprise Fund will invest in cash-strapped small firms which have good growth potential.

The Federation of Small Businesses has welcomed the latest package and says banks now have no excuse not to release more working capital for businesses.

But some say the scheme is too little, too late.

Nationally, small business closures have risen to around 85 a day, meaning that more than 6,000 have closed while waiting for the fund to be implemented.

There are also fears that banks will hike up loan interest rates to offset any increase in lending, putting further pressure on companies’ cashflow.

THE REACTION

Dave Stone of Darlington-based Stone Technical Services, said he would consider using additional funding from the scheme to invest in staff training facilities.

“If there’s money available, I’d be interested. The longer the recession goes on, the people who are best equipped to deal with it will come through.”

Darlington’s Kerry Lewis, who runs mobile beauty salon My Little Beauty, is hoping to secure extra funding to help manage her cashflow.

While her birthday party events are “going great guns” - she has organised eight already this month - her day-to-day treatments are down by 50% on previous years.

David Porter, founder of combined restaurant and takeaway The Wok Stop in Middlesbrough - says the funding package may not be enough for the UK’s SME community. “It sounds like a lot of money but it doesn’t go very far. We also need to know if there are any restrictions on how you can spend the money.”

Middlesbrough-based sporting web design firm, 13 Strides, won’t be relying on Government loans to fund expansion.

Co-founder Kevin Allinson says: “We don’t base our business model on borrowing. We get the revenue in first before investing in things like computer hardware and software.”

If there’s money available, I’d be interested. The longer the recession goes on, the people who are best equipped to deal with it will come through - Dave Stone of Darlington-based Stone Technical Services