Archived News
New funding for start-up and small businesses. - 03/08/11
THE MARCHES LOCAL ENTERPRISE PARTNERSHIP
CHAIRMAN'S BULLETIN No. 9
02.08.2011
Special Focus on Access to Finance
The Marches Local Enterprise Partnership is committed to supporting SME businesses and a core priority is to assist with Access to Finance for these businesses.The focus of recent discussions has been access to finance, how the flow of credit to our SMEs is vital for supporting growth and how start-ups can ensure they are given financial support to launch and sustain enterprise, ultimately creating new jobs.
Bank lending remains a major concern for businesses which should be aware of alternative sources of funding to help finance the private sector recovery. There are ways in which businesses can access this finance directly and there will also be initiatives and schemes where the LEP can assist with developing relationships between investors, loan organisations and businesses.
Below I have covered some of the issues under discussion at these meetings, which also serves as a brief guide to where SMEs can access finance. This information is available on the website.www.marcheslep.org.uk
LOANSCommunity Development Finance Institutions (CDFIs) are independent financial institutions, which can provide loans ( of up to £50,000) to start-up companies, individuals and established enterprises unable to access finance from more traditional sources.
It may be in the future that CDFIs could be developed for loans,using money from individuals (with tax relief), local authorities, other banks and ERDF grants to cover potential losses. More information is available at www.cdfa.org.uk
There are also larger specialist loans or mezzanine funds available with public and private finance, and, at a start-up level, the Princes Trust, www.princes-trust.org.uk for young people between 16 and 25 years of age.
The Enterprise Finance Guarantee (EFG) is a targeted measure which supports additional lending, of between £1,000 to £1m, to viable small businesses lacking sufficient collateral or financial track record to access a normal commercial loan.
The guarantee can be used to support new loans, refinance existing loans or to convert part or all of an existing overdraft into a loan to release capacity to meet working capital requirements.
EFG was introduced in January 2009 – replacing the Small Firms Loan Guarantee – as a temporary measure in response to the economic downturn which led to the decline of credit to SMEs, and guarantees 75 per cent of the loan More information on the BIS website HERE.
GRANTS
A new Technology Strategy Board scheme is offering funding to small and medium-sized enterprises (SMEs) to engage in R&D projects in the strategically important areas of science, engineering and technology, from which successful new products, processes and services could emerge.
Open since April this year, the Grant for Research and Development (Grant for R&D) scheme will support R&D projects which offer potentially significant rewards and could stimulate UK economic growth. Any UK SME working in any sector may apply; applications are accepted on a rolling basis for assessment by independent experts.
From August 1, the New Enterprise Allowance (NEA) is available to help unemployed people start their own enterprise. Participants will have access to a volunteer mentor who will provide support and guidance. Once a viable business proposition is demonstrated, they will be able to access financial support. The total start-up package is worth more than £2,200.
The Herefordshire Business Board is offering a Business Booster scheme. The scheme will support a range of initiatives aimed at supporting the growth or diversification of existing businesses. This includes research and development, marketing, product development and diversification. Particular emphasis should be placed on innovative solutions for the business.
The first round for applications is 23 September 2011.
Shropshire Business Board has run the Shropshire Business Enterprise Fund since November 2009 and has provided £310,000 of finance for start-ups, boosters and empty shops. 170 grants have been made. Initial indications are that the investment led to the creation of over 35 FTE new jobs. Funding has now run out but new funding of £0.5M from Europe is due to be approved at the end of the month.
The LEP is investigating how it can assist businesses looking for grant support, including exploring options with regard to special local authority business grants and funding from the European Regional Development Fund.
VENTURE CAPITAL & BUSINESS ANGELS
There has been little success experienced with public or private equity finance below £50,000, with most venture capitalists looking to invest in a business with a minimum investment need of £2 million. However, Business Angels do operate at this level, particularly with existing commercial operations. Business Angels often require more choice and scale with regard to the businesses they choose to support.
COMPANY SUPPORT AND INVESTMENT READINESS
Accountants, brokers and other finance experts also have a part to play in assisting SMEs in the Marches gain access to finance. Businesses in this sector should be encouraged to develop local relationships, product awareness and services including finance packages. Although this can be done at a local LEP level, there is an opportunity for cross-LEP working for the exchange and exploitation of expertise and development of specialised support programmes such as support for high growth companies.
For further information on how businesses can access finance, a good outline is provided at on the Business, Innovation and Skills website.
For further information on the work of the Marches LEP go to our website at www.marcheslep.org.uk and we'd be delighted to hear your feedback at enquiries@marcheslep.org.uk
DR GEOFFREY DAVIES OBECHAIRMAN, MARCHES LOCAL ENTERPRISE PARTNERSHIP
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