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Businesses asked how finance options could be increased

Businesses asked how finance options could be increased

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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Image: Safe Blood by denn

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