Access to Finance and Banking Issues. 

Access to finance is crucial to business growth and growth of the economy. 

During 2009 many small businesses in Yorkshire & Humber have found it difficult to access new finance, or even retain existing borrowing facilities.  

Andrew MacHutchon, FSB Yorkshire & Humber spokesman on finance and banking. 

Availability and Cost of Finance

During January 2010, according to the results of a snap poll of FSB members, 18% of small firms in Yorkshire & Humber Region had applied for finance in the previous two months.  Of these, 36% said their application had been declined and a further 14% were still waiting to hear.

In the same snap poll, of those that were successful in obtaining new finance, 19% had found that the cost of the new credit was higher than previous experiences. 

Of those small businesses that had existing borrowing, 21% found that the cost of that borrowing had increased over the last 2 months.  

Sources of Finance used by Small Businesses

The FSB's 2010 'Voice of Small Business' survey revealed that in Yorkshire & Humber Region, the most popular major sources of finance used by small businesses are as follows:

Bank overdraft - 28%

Retained profit from within the business - 26%

Own savings - 24%

Bank loan (secured) - 12%

Personal credit card - 7%

Business credit card - 7%

Family - 7%

Bank loan (unsecured) - 6%

Supplier credit - 6%

 

This demonstrates the heavy reliance by small firms on banks if they are unable to finance their business from personal resources.  Sources of finance such as venture capital, business angels, factoring, Small Firms Loan Guarantee Scheme etc barely featured.

Possible Solutions 

The FSB sees the key problems as being:

• Reduction in competition and choice of small business banking services.
• Failed relationships between small businesses and the banks
• Lack of trust in the banking system needed by small businesses and the economy to help the recovery.

The FSB calls on the Government to:

• Not sell its shareholdings in nationalised and capitalised banks to other banks.
• Use Regional Development Agencies such as Yorkshire Forward to disseminate Enterprise Guarantee and European Investment Bank loans to small businesses.
• Financial Intermediaries, recently created by the Government, should be actively promoted to viable small businesses unable to access finance.
• Turn the Post Office into  Post Bank offering support for small firms by utilising the Post Office Network and operating either as a solely state owned bank or as mutual or trustee bank.

At a regional level, the FSB has been lobbying on the issue of Access to Finance for small firms though Yorkshire Forward, through the Regional Minister, and through the Regional Economic Delivery Group.

If you are aware of any local case studies of viable small businesses that have struggled to access finance, the details would be very useful to support our lobbying, so please do contact us.  We regret that we can not take up individual cases however with lending institutions. 

Useful Regional Contacts: 

Yorkshire Forward, our Regional Development Agency who administer several awards schemes on behalf of funders such as HM Government and the European Commission.

Business Link Yorkshire, for details of finance and grants that are available within the region. 

The South Yorkshire Investment Fund which offers seedcorn finance, business loans and equity-linked investments from £15,000 to £2.5 million for businesses in or relocating to South Yorkshire.  

Enterprise Ventures who manage a fund providing venture capital support over a wide range of business in Yorkshire and Lancashire, and it also manages the Coal Field Investment Fund.