As The CFN celebrates its 10th anniversary for advising and supporting SMEs via its national network of accountancy firms, its founder sets out 3 key ideas for the main political parties as they develop their election manifestos
The Corporate Finance Network hopes that the main political parties will focus on helping owner managed businesses to continue to support the growth of the economy, and put an end to some worrying developments in the current environment for SMEs.
Kirsty McGregor, Founder and Chairman of The CFN explained “From my discussions around the country I found that most SME business owners opposed Brexit last year, mainly because of the upheaval and uncertainty it was likely to bring. But since the referendum result, most are now just hoping that the government can negotiate a deal, and, more importantly, the country’s tax, legal and civic systems can keep up and operate efficiently whilst moving to a new regime.
So my call to the political parties is to consider areas wider than just the issue of Brexit, and I have set out below some issues that concern me and are going to damage the long-term future of the country’s entrepreneurial legacy, unless they are addressed:
- Supporting acquisitions of SMEs - 99.9% of the businesses in this country employ less than 250 people, and 99.3% employ less than 50. They provide almost half of the population’s employment and half of the economic turnover in the UK. However, their owners are an aging demographic and there is little incentive to encourage the transition of businesses from one management team to another. Most owner managers are nervous of buying another company, and a campaign to educate them is required, along with tax advantages to encourage them to consider this growth route. My concern is that we will see an ever-increasing number of businesses wind up over the next five years and make inevitable redundancies, because there aren’t enough purchasers willing to take over the business. In addition, funding to support management buyouts, such as that which is already available in Wales, could be rolled out around the UK, along with a programme to communicate this message of the importance of succession planning to the current owner managers.
- FCA re crowdfunding - I would like to see an overhaul of the leadership and strategy at the Financial Conduct Authority, in particular those who are involved in regulating the crowdfunding industry. Whilst the whole sector appreciates the need for regulation and a sensible approach to this rapidly expanding form of finance, there is a drastic need to speed up the authorisation (or otherwise) of existing crowdfunding platforms, and to enable the consequential rollout of their Innovative Finance ISA products, announced in a flurry of excitement by the government in April 2016, but as yet, only a handful have been made operational. The months of delay in this process has been excruciating to watch, and I can only imagine how frustrating it must be for the innovative management teams of the crowdfunding platforms, who are seeking to transform the finance available for SMEs in this country, but are being held back at every step by the establishment.
- Government Designated Platforms for SME Finance - Announced in last year’s Spring budget, and then brought in from November 2016 as part of the "Small Business, Enterprise & Employment Bill 2014/2015", is a requirement for banks to refer any SMEs they have declined for funding, to one of three ‘Designated Platforms’, which are online finance brokerages, where businesses can pitch their requirement for finance directly to alternative lenders, many of which are online lenders only. Whilst this in principle may seem a great solution for businesses, there is a distinct lack of any advice during this process, and I think the Government are effectively encouraging businesses to sign-up to potentially high rates of interest, not dissimilar to money lenders of the ‘Wonga’ type service which has been so much concern in the area of consumer finance. When a small business owner is turned down for finance by a mainstream lender, usually after weeks of back and forth communications, it will inevitably result in an even more urgent funding need, possibly verging on a crisis. Some of the funders on these ‘designated platforms’ offer finance at extremely high rates of interest, over 20% or 30% APR, and it would take a very strong-minded entrepreneur not to succumb to any offer by that stage. I would like to see a review of the function of these platforms, and I call upon the political parties to prioritise the support offered to SMEs to allow them to grow, but within an environment that includes sensible business advice and a consideration of all the routes available to them.
The member firms of The Corporate Finance Network have completed almost 500 deals since it set up 10 years ago. These include fundraising assignments, acting for purchasers and selling businesses for vendors, predominantly all within the SME arena.