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Most firms to ‘miss out’ on new business funding

Most firms to ‘miss out’ on new business funding

Category: Business

Updated: 19/05/2011
First Published: 19/05/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Some of the UK's largest banks and the Government have teamed up to launch a new business fund, but most firms will miss out on investment, it has been claimed.

Barclays, HSBC, Lloyds, RBS and Standard Chartered have all signed up to take part in the Business Growth Fund (BGF).

Firms will be able to apply for investments of between £2 million and £10 million from the banks.

In exchange, the banks will take a share of between 10%-50% from the firms, which must turnover between £10 million and £100 million to be eligible for the scheme.

The BGF says its mission is to recognise and invest in UK companies that have real potential to succeed.

"Our ambition is nothing less than creating the household business names and listed companies of tomorrow," it says.

The scheme has been met with something of a lukewarm response, however, with even the Business Secretary Vince Cable telling the BBC that more needs to be done to help small firms.

The Forum of Private Business (FPB) has added its voice to the debate, warning that the vast majority seeking finance will miss out on the £2.5 billion fund.

The body has cited statistics from the Department of Business, Innovation and Skills which suggests that just 5% of small and medium sized businesses have funding requirements of £1 million or more, with a quarter requiring between £10,000 and £24,000.

In addition, just one in 100 firms are seeking an equity finance deal, with the overwhelming majority opting not to sacrifice a stake in their business, preferring to take out loans and utilise overdrafts instead.

"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 Forum's 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."

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