Not all of the money has dried up

Jan 13 2009 by Neil Warwick, The Journal

RAISING finance: grim, unprecedented, doom and gloom, disaster for the economy, market failure, bleak, frightening…

The list could go on and on and comments about the credit crunch could fill this column and, strung together without verbs or conjunctions, would be at least as credible as some of the recent commentaries.

Yes, it is impossible not to hear, see or read something depressing about the current state of the economy. Having got that out of the way it is important to look for positives as markets operate on confidence. As soon as the confidence goes out of the market, whether or not it is the fruit and veg market on the Team Valley or the world’s stock exchanges, there will be an adjustment. Equally, by constantly talking down the economy a recovery will be slow. Therefore looking for positives is not just a cheap morale booster, it is vital to stimulate recovery.

Obviously in this region we do not have £400bn to kick start the local economy. We do however have a range of funds which can, in a small way, help stimulate growth in the SME sector. Going back to 1999, not to analyse previous market adjustments, but to look at the start of the so called Gap Funding creation which formed the foundation of the Access to Finance programmes. Since then, the region, via One North East, has created at least a dozen significant funds to stimulate SME growth. While many of these are now fully invested, many still have funding available to assist start up and growing companies such as the Regional Investment Fund (Entrust), the NEL Growth Fund (NEL), Proof of Concept Fund (NSEI) and the North East Investment Centre (Business Link).

The Fund Creation, an associate mentoring support offered, has been part of a decade long campaign (the first in the country) to ensure that funds were available to companies that could not raise finance. Ironically, while the impetus for this programme was prudent financial management, it was stimulated from the perspective of ensuring the so-called funding gaps (between unsecured and secured lending, between secured lending and venture capital, etc) did not adversely affect our SME creation. Now it seems doubly prudent that, in credit crunch times, we have lines of funding which some parts of the private sector do not. It should also be noted that a number of banks supported this less than sexy sector out of a sense of responsibility. Northern Rock was one of the first banks to assist this sector.