News

Growth fund unlikely to deliver for majority of channel

Simon Quicke

The impact of the government's business growth fund is expected to be minimal on smaller resellers as most would prefer to stick with traditional methods of getting access to finance.

Measures outlined in the Budget to spark off more investment in the SME sector come into force today with a £2.5bn growth fund being made available supported by the major high-street banks.

Project Merlin, the name given to the efforts to get banks lending more, was unveiled in February and aims to get banks lending more to SMEs and the growth fund was a part of a number of efforts designed to get more credit flowing through the economy.

But according to the Forum of Private Business (FPB) the terms of the loans, which require the banks to take stakes in those they give backing to, as well as the bar of lending large amounts means very few smaller firms will take advantage of the scheme.

The FPB quoted the government's own figures which showed that only 1% of SMEs are looking for equity finance as most would avoid losing a stake of their business with 40% preferring to stick with a bank loan.

Gaining access to credit has been a constant bugbear of the channel and the FPB along with other business groups has repeated calls for the government to put pressures on the banks to loosen the purse strings.

But the growth fund that has come into effect from today is not the answer that some in the channel will have been looking for.

"The Business Growth Fund aims to bridge the clear gap in funding for 'high growth' firms identified in the Rowlands Review back in 2009 and so is certainly a welcome step and one that is long overdue," said the FPB senior policy adviser Alex Jackman.

"But we cannot allow this to overshadow the real problem - the lack of affordable lending being made available by banks to start-ups and other small businesses - those that are not eligible to benefit from the fund. There is a real danger that these firms will be left behind and that would be disastrous for the economy," he added.

Join the conversation Comment

Share
Comments

    Results

    Contribute to the conversation

    All fields are required. Comments will appear at the bottom of the article.