The
support package, which builds upon the commitments outlined in
November's Pre Budget Report, consists of loan guarantees and a new
Enterprise Fund aimed at helping companies struggling to access finance
for working capital and investment.
My View
In theory the financial packages sound like they will help SME's. Well here we are 3 months on, are these schemes helping SME's? Apparently not, many of my business contacts advise they are still struggling to obtain funds from banks. As usual, the banks are holding SME's to ransom. Not only are the banks refusing (on the whole) to lend to SME's, they are making matters worse by demanding full repayment of existing credit facilities. Unless the banks change their stance and start to lend again, more and more SME's will go to the wall.
What I find incredibly hard to believe is the fact that most banks almost chucked money at the "sub-prime" market, but when it comes to lending money to business they (the banks) are completely risk averse. Entrepreneurs have a hard time getting backing for any venture that is not considered "the norm" by the banks.
The government (in particular, Gordon Brown) have totally screwed our economy and if they fail to act fast and offer "real" help to SME's, who after all are the lifeblood of this country, it will end up costing the taxpayer very dearly indeed
"60% of the people in The UK are employed by SME's"
I understand why the banks were bailed out by the government (taxpayer), but, I still can't help feeling that to some extend the taxpayer has been ripped off. When you consider that the management of these banks have completely screwed up their businesses through poor "risk" decisions and bleeding the banks coffers dry by drawing huge bonuses and paying themselves obscene salaries.
As an SME, we don't get any such support from the government - wouldn't it be nice knowing that if your business was on the verge of failure, the government would be there to bail you out!.
Press Release 14/01/2009
Business Secretary Lord Mandelson today (14/01/2009) unveiled a package of
measures designed to address the cash flow, credit and investment needs
of small and medium businesses.
The Government measures include:
* A £10bn Working Capital Scheme, securing up to £20bn of short term bank lending to companies with a turnover of up to £500m
* An Enterprise Finance Guarantee Scheme, securing up to £1.3bn of
additional bank loans to small firms with a turnover of up to £25m
* A £75m Capital for Enterprise Fund (£50m from Government augmented by
£25m from the banks) to invest in small businesses which need equity
Business Secretary Lord Mandelson said:
"UK companies are the lifeblood of the economy and it is crucial that
Government acts now to provide real help to support them through the
downturn and see them emerge stronger on the other side.
"We know that some companies are struggling to secure the finance they
need, not because of any failure in their business but due to the
tougher credit conditions. That is why we have designed a package of
measures addressing different forms of credit and providing real help
for businesses."
The Working Capital
Scheme is a direct response to the constraint on bank credit available
for lending to ordinary-risk businesses with a turnover of up to £500m
a year.
The Government will provide
banks with guarantees covering 50 per cent of the risk on existing and
new working capital portfolios worth up to £20bn.
The guarantee will secure up to £20bn of working capital credit lines
for companies - ensuring they are safe from reduction or withdrawal.
In addition, the guarantee will free up capital which the banks must
use for new lending as a condition of this scheme. This is lending that
would otherwise not have been provided.
The Enterprise Finance Guarantee aims to help smaller, credit-worthy
companies which might otherwise fail to access the finance they need
for working capital or investment finance due to the current tight
lending conditions.
The Government will
provide £1bn of guarantees to support to £1.3bn of bank lending to
smaller firms with an annual turnover of up to £25m, which are looking
for loans of up to £1m for a period of up to 10 years.
The guarantee, available through high street banks, will apply to loans
and can also be used to convert existing overdrafts into loans to
enable businesses to free up their current overdraft facilities to meet
working capital demands.
To help
businesses raise new long-term finance, the Government will also offer
to invest in viable companies which have high levels of existing debt
through a new £75m Capital for Enterprise Fund. Banks are contributing
to this fund.
The fund, to be managed
externally, will provide long term capital to businesses which have
exhausted traditional forms of finance. Companies can then use this
capital to invest in and grow their business.
Lord Mandelson also confirmed today the Government is discussing with
trade credit insurance providers a Government scheme to help companies
affected by reductions in their credit insurance.
In order to help businesses identify their financial needs, the
Government is today launching a new "one stop shop" easy-to-use web
portal. The portal, on the businesslink.gov website, will direct
companies to the most appropriate form of support and help them
ascertain their eligibility for a range of government support.
The ruling is in response to an appeal by the eight High Street banks at the centre of the case.
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