The Business Secretary’s much-reported government plans to create a business bank may have the support of the Federation of Small Businesses, but many entrepreneurs were less welcoming.
The FSB said the move would open the door to alternative lenders and create new ways for small businesses to get finance, such as credit unions.
“We are certain the newly created ‘small business bank’ will help boost confidence and deliver growth in the economy,” national chairman John Walker said in a statement.
But serial entrepreneur and chair of Balhousie Care Group Tony Banks says he thinks the business bank was “a non-starter”.
“The devil is in the detail but… I believe it will not raise the private sector investment and it will also be to difficult to administer and regulate,” said Banks.
“The state already owns two banks and they can’t get the cash out to hard-pressed businesses, so what chance has this new initiative got? The government must work and encourage the existing banks to get capital flowing to businesses.”
Tony Rafferty, chief executive of the AIM-listed Printing.com, said while the funding may help plug some longer-term loan gaps; it leaves “myriad funding challenges” for early-stage entrepreneurs.
“At a point where Nick Clegg is calling for higher taxation on top earners and wealth tax, further consideration should be given to enhancing Enterprise Investment Schemes (EIS),” he said.
Ben Edmonds, a founder of small business advisory We Sort, said another potential sticking point could arise given that the smaller the business is, the tougher it is to put resources such as time, experience, people and money towards actually applying for and receiving this funding.
“For this to function and appeal to small and medium-sized companies, the application process needs to be extremely simple and efficient,” he said.
“Many of the businesses I work with have fewer than 10 employees – sometimes called ‘micro-businesses’. They find little time to focus on the ‘business’ side of their business, ploughing all their efforts into their core products, which usually means they miss opportunities such as this.
“It would be brilliant if the business secretary’s bank made money available for business development.”
And Rob Law, founder of the kids’ wheelie suitcase phenomenon Trunkis, said more also needed to be done to reduce red tape around employment law to kickstart entrepreneurial growth.
Law continued: “I’m in support of the government helping SME’s and specifically targeting manufacturers, exports and high growth companies. But they should only loan to businesses with a bright future, some businesses struggle for a reason and we should not prolong their demise especially with taxpayers’ money.
“There isn’t enough detail to say whether the bank will go far enough; I remember the business growth fund looked promising but a high entry barrier of £2m in funding puts many SME’s out of its reach.”
The business secretary’s idea was given the initial go-ahead enabling the announcement of the business bank at the Liberal Democrats party conference in Brighton, stating the bank will be funded using £1bn of taxpayers’ money found through government cost-cutting.
Worryingly for Cable though, Karen Campbell, a Manchester-based partner at accountancy firm Grant Thornton who works with entrepreneurs across the UK, has questioned whether the policy would be allowed to survive in the event of the Conservative party winning the next general election.
Article courtesy of Charlie Thomas