Access to funding remains a vital factor across the region

Money Posted 21/07/13
Gaining finance remains a challenging prospect for many young firms. But as Neill Barston discovers, there is hope on the horizon for those with bright ideas

For many smaller and medium-sized firms across the South East, gaining access to finance remains one of their most pressing challenges.

On the one hand, banks are being instructed by the government to lend more, yet have to be mindful of minimising their lending risk, which has led to many enterprises failing to gain the capital they require.

As national reports recently stated, our latest generation of creative workers are seemingly finding it the most difficult to gain start-up funding.

However, with signs our recession is at last starting to thaw, there are signals in the marketplace that finance may well be possible for those with a strong business plan. Among those gaining positive headlines in recent months have been Handelsbanken, which is part of the ‘challenger bank’ movement in seeking to engage with a range of strong emerging business ventures.

There is also the much-anticipated business bank hailed by Vince Cable, which may offer companies a further vital life-line in coming years.

Aside from high street lending, some businesses have increasingly opted for a route of invoice financing practiced by national firms such as IGF in a bid to stabilise their business.

Those who have entrepreneurial tendencies may favour examining the rapidly-expanding concept of crowd funding, or peer to peer lending, which has proved fruitful for a number of projects and innovative ideas that are thrown open for anyone to invest in.

As Tudor Price, the business development manger at Kent Invicta Chamber of Commerce describes, there are in fact some more traditional routes available too, including potentially tapping into government funding streams that are targeting start ups.

He said: “We are finding that banks are being quite risk averse in their lending, but there have been some signs of positive activity in terms of banks’ marketing. They are making more effort to engage with SMEs, but they are still being selective.

“There are still not that many new firms out there that will meet the criteria that they are asking for, though there are some that are trying to look at businesses with a view to their longer-term viability. But banks do need to make sure that they get their money back from loans and that their customers have the ability to make payments.

“There is good news within Kent for the regional growth fund, in which £35 million pounds is being made available in East Kent for start-ups and £20 million available in North Kent, though the government is being quite particular what the money can be directed towards.”

Mr Price also highlighted a loans programme devised by former Dragon’s Den star James Caan, which has a £2.5 million pot designed to help 18-30 year-old see their innovative ideas come to fruition.

In terms of its own services, he said the chamber had enjoyed assisting a broad spread of young companies and individuals with workshops and advice sessions on seeking business finance.

While he believed there was some cause for optimism, it was still the case that many young people in particular were finding it hard to agree financial arrangements. “We don’t have precise figures at the moment, but we see around 1,200 businesses a year as a chamber and presently, only around 12 or 13% of those get off the ground.

Sharing his assessment of the lending picture, Simon Webster, of Facts and Figures Financial Planners, agreed that finance was available out there for those who had solid business prospects. He said: “Everyone is saying that it is hard to borrow money from banks, but that is not the case for those with the right proposition. People need to be able to offer security for the loans they take on and should not expect anyone else do so.”

Tweets from @SEBmagazine