The Chairman of The Corporate Finance Network has today written a blog appealing to be noticed by the government. She says the new Funding for Lending scheme won't work and ENOUGH IS ENOUGH!
The Corporate Finance Network, a UK-wide network of 22 regional accountancy firms, has begun a campaign to lobby the government. Its Chairman has issued a challenge to the Coalition to listen to her alternative, but common-sense advice, to solve the economic problems and funding issues for SMEs. In the past 24 hours since its launch it has begun to gain support across twitter and other social media channels.
Her view is that the newly-announced Funding for Lending Scheme won't help SMEs, even though it may give banks some support and reduce their exposure to the Eurozone instability. Kirsty McGregor, Founder & Chairman of The Corporate Finance Network, explains "Linking this scheme to SME lending just confuses the issue, and in this respect it will not meet its objectives for releasing liquidity to SMEs. There isn't the demand for businesses to borrow, and this is due to wider issues concerning businesses & their relationships with banks."
Instead, The Corporate Finance Network has made alternative suggestions to the government which include:
1. Tax break for business acquisitions: There is a focus on encouraging brand new start-up businesses, and whilst this is very admirable, they are inherently very risky and have a high failure rate. The proposal by The CFN is that there should be a tax break to purchase existing small businesses.
- Many of these businesses are underperforming and consolidation is needed in sectors which are too dispersed;
- An aging business owner population means that an increasing number of businesses are winding up. When owners finally retire, they are less likely to sell to large corporates who are now more risk-averse. When these businesses stop trading it is detrimental to the local economy as it removes employment and output;
2. More transparent lending contracts with a new medium term overdraft product: Most overdrafts are renewable each year, but this isn't long enough for a business owner to feel secure in their
facilities. In addition, in practice, banks can make changes to the terms at any time. Many businesses are nervous about approaching banks for new lending, as they don't want to bring attention to their relationship and affect the stability of existing facilities. The CFN is proposing a more equal relationship in the contractual terms of the legal agreements between banks and customers, and the introduction of a longer term working capital facility.
3. Use any interest rate incentive schemes for less traditional financiers: Independent Asset Based Lenders (such as invoice discounters and asset financiers) and Crowdfunders aren't able to access most of these recent schemes for banks. But these new lenders are becoming the most active in the marketplace. So if you are offering a scheme to encourage lending, aim it at them, then it will be much more effective.
Kirsty McGregor explains "The lending environment has changed forever. Trying to fix problems with old solutions of traditional lending just won't work any longer, and the government need to look at completely different approaches if they want to boost the economy and help small and medium sized businesses. We believe that our ideas are a refreshing change to what has gone before, and together with our more innovative way of looking at a businesses' funding requirements, we can help provide the stimulus that the country truly needs."
If you agree with our campaign and support our ideas, please retweet this page and/or the blog and use the #ENOUGH and take the 7 question survey here: https://www.surveymonkey.com/s/LobbyForSMEs
Read Kirsty's blog here: