Beyond the Banks

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The issue of funding for small business is perennial - and one that has attracted regular public policy initiatives. Back in 1931, the Macmillan committee on Finance and Industry identified a gap in the provision of long-term capital to smaller businesses, in the context of concern about whether British banks served domestic industry well enough. The result was the creation of the Industrial and Commercial Finance Corporation to finance small businesses, a forerunner of 3i.

While equity finance was the main theme of that initiative, the provision of credit by banks to business has topped the recent agenda. Since the financial crisis, successive UK governments have negotiated agreements with the biggest banks on lending targets to business. This year's 'Project Merlin' targets are £190 billion overall and within that £76 billion to smaller companies. At the half-way stage these gross lending amounts were broadly being met. But the figures include undrawn overdraft facilities and exclude repayments. Vince Cable, the business secretary, complained in late July that lending to small and medium-sized enterprises (SMEs) had been contracting since the recovery began in late 2009.

This report explores access to finance for SMEs and includes short profiles of businesses that are working in innovative ways to channel credit to the small business market

Published:
September 2011

Author:
Andy Davis