Small businesses and accountants for contractors denied funding from one of the big 5 banks now have the opportunity to get their application reviewed by another person within the bank under the new loan appeal system launched by the Business Finance Taskforce last week.

This individual will not have taken part in the initial decision making process. The big banks also need to provide unsuccessful applicants with information on alternative ways to obtain finance, or put them in contact with a business mentor.

Professor Russel Griggs has been appointed as the external independent reviewer and he will report each year on the effectiveness of the scheme.

The FPB believes this is a welcome move and if it is implemented correctly it will help restore a measure of trust in bank lending. However, the Forum stresses that business owners must take advantage of the appeals process if they think they have been treated unfairly. Even if they think they will still be refused, lodging an appeal will create accurate data on how effective the system actually is.

Phil Orford, the FPB chief executive, pointed out that the Better Business Finance campaign has ensured that the major banks now have to spell out the standards businesses can expect to receive, and SMEs can obtain online support and access to an appeals process if they feel lenders are not living up to the standards.

Brian Mairs from the British Bankers Association explained that any company turning over up to £25 million can use the appeals process if it feels it has received unfair treatment over a loan application. The appeal must be launched within 30 days. The BBA also pointed out that the initiative is not designed to increase the amount of money lent to small businesses, rather to ensure that lending decisions are correct.

The FSB has given a cautious welcome to the new system. Any measures that increase transparency and fairness have to be a good thing, a spokesman for the FSB commented. However, the Federation is disappointed that the system is not open to all businesses regardless of size or number of staff employed.

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External reviewers have been appointed by the Business Finance Taskforce to ensure the Big 5 British banks stick to their promise of a ‘fair, prompt and transparent’ appeals process for companies that are refused loans.

The review team will be led by Professor Russel Griggs and supported by Promontory, a consultancy firm. HM Treasury and the BIS Department have backed the selections.

Companies can see details of the treatment they should receive from the Taskforce banks by checking the website or the site of their own bank.

The chief executive of the BBA, Angela Knight, explained that last October the Business Finance Taskforce agreed to 17 initiatives aimed at supporting UK SMEs. One of these was to set up a monitored process for appeals. The Taskforce banks have agreed a common set of principles for operating individual appeals and these should help businesses receive the support they need to grow.

Phil Orford, the CEO of the FPB, said business owners should not let the banks off the hook; rather they should lodge an appeal as soon as possible if they are denied funding. Otherwise the financial institutions will be able to say that SMEs are satisfied with lending decisions.

Meanwhile, Barclays Bank credit card division has recently acquired the credit card portfolio of MBNA Europe in a move which will expose the high street bank to around £130 million of outstanding debts.

Bob Diamond, the new chief executive of Barclays, has decided that the bank should increase its appetite for risk if it is to meet its profitability targets for the next three years.

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For the last couple of years, SMEs and contractor accountants have had difficulties accessing finance and the problem still isn’t going away, says Ed Moss from the Manufacturing Institute.

Despite the banks assuring us that they are open for business and ready to help, people still don’t trust them.

Could that situation be about to change? The European Commission recently announced the introduction of a European Union Small Business Act. Included in the policies is an action plan intended to improve access to finance for SMEs’, help them enter the venture capital markets and raise awareness of SMEs potential amongst investors.

One measure that might help small business cash flow is the requirement for public sector organisations to settle their debts within 30 days. The public sector has been criticised for a long time for its tardiness in paying suppliers; many of whom are small enterprises who have been struggling to keep afloat since the start of the recession.

Ed Moss also pointed out that banks could help SMEs if they speed up the cheque clearing system. If you pay a cheque into the bank on Monday, you have to wait until Thursday before it clears. In Sweden and Greece, you pay the cheque in at 10:00 and it’s cleared by 12:00 the same day or the bank is fined.

Moss made his comments after the FPB revealed that over 200 entrepreneurs are supporting the Get Britain Trading campaign designed to promote the contribution small enterprises make to the country’s economy.

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Finally, HMG is starting to come good in its promise to put 25% of government procurement in front of SMEs and other small suppliers. A new search website has been launched, where you can find and bid for a whole range of smaller contracts ranging from managing a construction project to window cleaning council buildings. Let’s just hope they remove some of the barriers that used to be there.

To be fair this kind of work has been on offer for some time. The Supply2Gov initiative has been dropping tender opportunities into my Inbox for the last two years. Sadly none have really been in my particular field of expertise, but at least they are there to be won if they were.

Apart, that is, for one small detail. The Pre-Qualification Questionnaire or PQQ

To be allowed to bid for any such work you have first to be approved as a potential supplier and the PQQ is the mechanism by which this is done. It is not a trivial document; it’s several pages long and, as you might expect, asks a lot of questions and seeks a lot of detail. It is trying to establish that you have the skills, expertise, resources and financial stability to do the job, which is fair enough. The problem is the parameters it sets to achieve it.

You have to prove that you have delivered the same piece of work, successfully, at least three times in the recent past. This is OK if you supply repeatable services such as the aforementioned window cleaning, or supplying desktop PCs or install Pelican crossings. It gets a bit harder – actually, a lot harder – if you are talking about softer skills such as project management, service improvements or even website design. This, no doubt, is a reflection of the lack of awareness at the buyers end of how some of these things work. For example, a school website may look very similar to one built for a retail outlet, but the underlying business model is very different. On the other hand, installing a Pelican Crossing or building a datacentre are, to a project manager, very similar operations indeed.

You have to demonstrate that you have at least three times the available finance than the project is worth. For the average project delivery role, the kind of thing I would be involved with, that means you need around £150,000 free capital in the bank. For a one man company to be sitting on that kind of reserves is just a little optimistic.

Finally to bid for the bigger pieces of work, you need to get together a team to deliver the work. Being contractors, that means either you bid for the work and sub-contract the work, or you form a consortium and bid as a single entity. Except that a single contractor is highly unlikely to have the financial backing demanded for what is now a substantial piece of work, and the individual members of a consortium aren’t allowed to aggregate skills and experience and finances, they are treated individually.

So all in all, it was a good idea but the delivery mechanism had some serious, and for some insurmountable, barriers to success. Let’s hope the new process is a little more user-friendly.

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Over 50% of people working in accounting and finance departments think the economic outlook is good at the moment and staff growth has gone up by 30%.

However, on the downside, many are warning that another wave of redundancies is inevitable.

Poolia, a specialist recruiter, conducted a survey that found financial departments are more positive about the economic outlook for next year although they do still have concerns over staffing levels.

57% expect to see revenue growth next year, 40% predict an increase in projects and more than 30% anticipate increasing recruitment.

The general manager at Poolia’s finance and accounting practice said that there will a race for talent next year but the long term outlook will remain challenging. Companies cut back on vital trainees during the recession and now find themselves in need of experienced workers. However, there is currently a shortage of people with the right skills to meet this demand. 38% of firms are struggling to recruit skilled employees at managerial level and 40% reported problems finding transactional clerks. This lack of supply could lead to more opportunities for contractor accountants.

George Osborne is reasonably confident that the government has taken the correct measures to secure a sustainable economic recovery. While speaking to reporters at the G20 summit in Seoul he said that economic data had been on the optimistic side for the past few weeks and that gave him cause for confidence.

The Bank of England on the other hand is erring on the side of caution saying the outlook remains uncertain. Mervyn King expects the recovery will continue but its strength will depend on developments in the world economy.

Inflation will remain high next year due to the VAT rise, rising energy bills and an increase in the cost of raw materials, but should fall below the 2% target in a couple of years.

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UK businesses are to receive financial assistance from a new business growth fund set up by six of the major British banks.

Companies whose average turnover is between 10 and 100 million pounds will be able to get equity support from the fund in one of a number of initiatives announced by the bank taskforce last week. Qualifying businesses could receive equity of £2m to £10 from the scheme.

Over the next few years, the taskforce, which comprises Barclays, Standard Chartered, HSBC, Santander, Lloyds and the Royal Bank of Scotland plan to build up a 1.5 billion pound investment portfolio.

However, Bibby Financial Services thinks that small businesses and freelancers have been overlooked by the proposals. Bibby’s chief executive, Edward Rimmer, points out that many small businesses will not have the high turnover figure necessary to qualify for this financial aid and the banks do not appear to have proposed any measures to help them.

He also questions whether businesses that do qualify will in reality want to hand over ownership of their company to the taskforce at a time when trust in the banks is low.

SMEs are the lifeblood of the UK economy and the government appears to be missing the point and targeting the upper end of the spectrum instead of helping the newer, smaller businesses, he added.

Another expert, Michael Baxter, the editor of the online magazine Investment and Business News, agrees that the principle behind the idea is a good but he thinks that the fund might not be big enough. He would like to see the Bank of England put some of the money it has earmarked for the quantitative easing programme into a similar scheme.

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There’s been a lot said recently about clamping down on the amount of migrant workers allowed to enter the UK. Despite this, the latest CIPD/KPMG Labour Market Outlook report suggests that as the UK labour market improves, so does the employment demand for migrant workers.

600 employers took part in the survey and 45% of them said they have experienced difficulties in recruitment. Engineering, IT and accountancy positions are hardest to fill and consequently 17% of employers intend to hire migrant workers during Q3. 21% have recruited migrant workers in the last 3 months and of those workers, 37% came from outside the EEA.

Offshore outsourcing also seems to be making a comeback with 9% of private sector enterprises intending to offshore jobs over the coming 12 months. India is still the most common offshoring location, followed by China and Eastern Europe. Call centres, IT and finance are amongst the most likely functions to be outsourced abroad.

The public policy adviser from the CIPD, Gerwyn Davies, pointed out that it will take time to train British workers to fill the positions currently being occupied by skilled migrant workers. He believes that the proposed migration cap should be phased in gradually so as not to harm our competitiveness.

There is currently a temporary visa cap on all new Tier 1 applicants and applications for Tier 2 visas are limited by the issuance of Employer Sponsorship Licences. The permanent cap on UK visas will be introduced next April.

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A new proposal to change the way leases are accounted for on company’s balance sheets could have serious consequences for UK enterprises and contractors.

The US Financial Accounting Standards Board and the IASB have published the joint proposal which would mean leased assets such as equipment, property and vehicles will have to be listed on firms’ accounts as liable assets.

The leasing industry is huge. The top 50 FTSE-100 companies currently have operating lease commitments of around £94bn. A lot of leases are not accounted for on balance sheets but the ISAB wants to see statements granting the right to use the asset and a liability to pay rental charges.

Banks hold thousands of properties on lease and increased liabilities spell bad news because too many liabilities on a bank’s balance sheet restrict its ability to lend. It is believed that the five big UK listed banks currently have total lease commitments of around £18bn.

Vince Cable, the Business Secretary, has already unveiled a consultation aimed at improving the flow of finance to businesses and he is not likely to welcome any proposal that could stifle bank lending further.

The lease issue is feeding into a broader debate about setting accounting standards. The FASB and IASB have tried to merge their accounting codes, but disagreements arose other the changes to complex lessor accounting. In turn, this disagreement has caused opposition to the FSAB-IASB relationship, saying it is causing increased complexity when it comes to financial reporting.

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Vince Cable, the business secretary, says that banks are making it harder for small firms to apply for loans despite claims from the semi-nationalised banks that they approve at least 80% of loan applications.

Stephen Pegge, the chairman of the small business panel at the British Bankers’ Association, claims other business bank accounts are also matching this rate.

Mr Cable said these claims are misleading and cited proof from business industry bodies such as the Institute of Directors that shows that the banks are not meeting demand.

The IoD recently published research which found that around 33% of UK businesses had been refused banks loans. However, there has been some improvement as similar research conducted last year found that 57% of businesses were refused finance.

The BBA has also released figures showing that net lending by the banks was at an all time low in May. £500m was lent to SMEs but the banks collected more than that in repaid debts and withdrawn overdrafts.

A consultation is to be launched this week to discuss business finance and it will consider whether there would be any benefit to be gained by forcing new targets on the two semi-nationalised banks; RBS and Lloyds. Cable thinks that mandatory action forcing the two banks to make more finance available could be an attractive option.

However, the Labour government was unable to force Lloyds and RBS to meet lending targets to limited company contractors even though they were legally binding and a spokesman from the Treasury said that the coalition was still considering whether a new target based option would be effective.

The consultation will also look at other business financing alternatives. The coalition has already said that using equity finance could be one possible option. Currently only between 1 and 2% of SMEs use this option and the financial secretary to the Treasury, Mark Hoban, says that the majority of small businesses are missing an opportunity. To encourage more freelancers and SMEs to take up the option, Vince Cable also suggested recreating 3i, a private equity organisation which provided equity for small, expanding businesses.

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Internal fraud can be a problem for companies and businesses are being advised to carry out random checks on their employees to find out whether they have financial problems that could lead them into temptation.

Small businesses, such as contractor accountants, could be particularly vulnerable as they don’t have strict vetting procedures in place when hiring staff.

There was a 45% increase in internal fraud in 2009 according to the CIFAS. Theft of cash and fraudulently withdrawing money from customer accounts were amongst the crimes reported.

Neil Munroe, from Equifax, said that businesses should be proactive in terms of tracking where things are going.

Another type of fraud that has recently been uncovered cost a recruitment agency £50,000. Individuals purporting to be from a food processing company contacted the recruiter with details of a contract vacancy in Thailand. A suitable candidate responded and was offered the position.

However, the candidate and the individuals claiming to be from the food processing company were actually in league together. By the time the agency discovered the scam they had already paid the IT contractor.

Fraudsters can carry out this kind of fraud because recruitment agencies check out the company they are doing business with rather than specific individuals. As contractors can be paid up to £1,000 a day, victims of these frauds can suffer a significant loss of money.

To avoid becoming a victim, Marilyn Davidson from APSCo advises recruiters to double check that the person really does work for the company they say they work for. This is not always easy because generally recruiters don’t meet the people they are dealing with. All the arrangements are made remotely.

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As SMEs struggle to access funding from the banks, the Treasury has launched a paper asking businesses to give their views on how to increase finance options. These will then be proposed later this year.

At the launch, Financial Services Secretary to the Treasury, Paul Myners said the economic woes of the last two years have highlighted the need for a more holistic approach to business finance, and that one single source of credit is not enough. With a widespread contraction in bank lending, firms that had previously relied on debt finance found themselves in a precarious situation.

In the UK, some of the larger companies have been able to access money direct from the credit markets, through the issue of corporate bonds. Small businesses, including many contractor accountants however have had their lending options squeezed dramatically, even though the likes of Lloyds TSB and RBS were given specific lending targets by the government.

British Chambers of Commerce economist, Steve Hughes, says that many businesses have struggled over the last 18 months to obtain finance through the banks.

‘The current fragility has brought to prominence alternative methods of accessing finance. It is up to the government to make sure funds that are available can be readily accessed by the business community,’ he adds.

According to research from network group Business Junction released in December last year half of overdraft applications are still rejected by the banks and businesses report that lending attitudes remained unaltered since August 2008.

In the same research, SMEs in London say small business support schemes have been ineffectual with only 22% of businesses saying they have been able to take advantage of the government schemes.

The lack of available funding from business bank accounts may be one reason why one in ten entrepreneurs plans to quit the UK.

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