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Government launches £330bn coronavirus business loan scheme

The government has launched the first stage of a £330bn loan guarantee scheme for businesses, to help small and medium-sized firms borrow up to £5m to help them weather the impact of coronavirus.

“Any viable business” with a turnover of up to £45m will be able to apply to banks for an 12-month interest-free loan, 80 per cent of which will be guaranteed by the government under its Business Interruption Scheme, the Treasury said.

“We know that businesses are in urgent need of access to funding during these unprecedented times,” said business secretary Alok Sharma, who added that the scheme “will ensure that credit keeps flowing to where it is needed, when it is needed”.

Chancellor Rishi Sunak last week unveiled an unprecedented package of measures aimed at supporting businesses and employers struggling with the economic impact of coronavirus, including tax deferrals and an employee retention scheme.

The Treasury said this morning that further measures would be announced to ensure large and medium-sized businesses could access financing.

The Bank of England this morning announced the opening of a scheme to buy up debt known as commercial paper, issued by large businesses which had an investment-grade credit rating or similar level of financial health before the coronavirus pandemic hit.

BoE governor Andrew Bailey said the corporate financing scheme would “help businesses manage through this period of uncertainty”.

“Combined with steps taken by the government, this will help companies through this difficult time and support the needs of the people of this country,” he added.

Bailey said last week that the Bank would look at widening the financing scheme to firms with lower credit quality, or buying other financial instruments such as asset-backed commercial paper.

By Anna Menin

Source: City AM

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Women-led startups are more fundable but men receive most of the cash

A study by Access Commercial Finance found that only 16% of applications received since July 2016 were submitted by women.

The firm handled 833 applications in total during that time period, but only 135 of those applications came from women. Men made 698 applications for funding during the same period.

However, the research showed that the women who did apply for funding had a success rate 18% higher than men. 13% of applications from women were successful, compared to 11% from men.

Overall though, due to men making 84% of the funding applications, they received the vast majority of funding awarded, £4,051,052 in total. Women received £332,437.

Not only are women less likely to apply for funding than men, they also ask for less money on average when they are do apply.

Based on applications where the full amount applied for was awarded, women received £22,162 each, £28,476 less than men, who received £50,638 each on average

Matt Haycox, consultant at Access Commercial Finance, hopes the findings encourage more women to think about applying for business funding.

“This data shows us that women are on average either better at putting together a funding proposal for their small businesses, or they just have more fundable businesses. Either way, it’s potentially good news for women-owned businesses and startups.

“But given the low application rate and low funding request amount for women, men are still getting most of the cash due to sheer volume of applications.

“We hope our data gives any woman considering applying for business funding the confidence to do so.”

Source: London Loves Business

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Are business loans still viable with Brexit?

Most start-ups need third-party investment to get off the ground. Sometimes, even established companies take out a loan to use as working capital. Whatever the reasoning behind them, business loans are an essential investment type for all manner of businesses, small and large, who wish to borrow. This has been the case for hundreds of years, and British banks and building societies have been happy to show faith.

Is Brexit a spanner in the works?

A spanner has been thrown into the works recently, however. Its name is Brexit, and it has lenders stifled. Some would say worried. There are several reasons for this. Many lenders are worried that Brexit could invalidate their long-term loan contracts with businesses in Europe. Some lenders are worried that a hard Brexit could go as far as to stop them from seeking new business in Europe.

These worries are tangible, and understandable, from both a lender’s point of view and the borrower’s. But do they translate into lenders tightening up their loan applications, and reducing their faith in small business?

The answer is no. Or at least, not yet.

It must be said that banks are reducing lending. It is now harder for people to get a mortgage, for example. However, businesses are still being funded right now, by major banks operating out of London and smaller banks alike. Independent lenders too are mopping up business tidily, committing several million through business finance and asset-backed lending. This is excellent news for small business.

Additional challenges of Brexit for business loans

SMEs do face another challenge with Brexit and lending, though. It is not just unique to them, but it affects them more than large enterprises. That challenge is currency volatility, or the unpredictable movement of exchange rates. If Britain has an unstable economy, then that could cause lenders to shift towards lending to larger businesses over SMEs, because big business is less affected by an instable economy overall. Unfortunately, this does mean inconsistencies with lending procedure month-to-month.

It’s fair to say that the result of the Brexit referendum took most lenders by surprise. Since the result was announced, lenders have attempted to determine what the result means for them. Thankfully, the following months showed that the leave result was not the catastrophe that some economists would have had us believe. Banks have not moved their headquarters from London. Small businesses are still thriving.

The bottom line with lending and Brexit…

Business loans are still viable with Brexit. Start-ups can expect funding as can larger enterprises. However, the need for a sound application is more important than ever before.

The viability of business loans with Brexit is simple – lenders are still lending during the Brexit negotiations. And they will continue lending after them. Specialist corporate finance companies will be the big winners, however, as traditional banks show uncertainty. Expect to see a lot more from finance specialists who offer start-up loans, business finance and equipment refinance solutions to British business.

Source: London Loves Business

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Council launches service to help local businesses access finance

Cheshire East Council’s arms-length Skills and Growth Company has launched a dedicated service to help local businesses access finance to boost their growth.

The Access2Finance service is in response to the findings of the latest Cheshire business survey, commissioned by the council, which found that 28 per cent of businesses said not accessing finance was a barrier to their growth. Nearly 40 per cent of them claimed that cash flow problems were also hampering their expansion plans.

The findings echo national research from the Financial Times, which revealed eight out of 10 business loans are provided by the big four banks and only three per cent of small businesses seek alternative finance options if turned down by their bank.

Access2Finance is a bespoke service to to help businesses navigate the many types of finance available, including grants, loans and equity finance, to help select the right funding for their business.

Councillor George Hayes, chairman of the Skills and Growth Company, said: “The Access2Finance service will provide a much-needed, impartial and personalised approach to ensuring businesses can source the right investment, at the right time, in order to fund their growth aspirations.”

The full Cheshire business survey results are available online.

Source: Alderley Edge

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Aldermore reports growing financial confidence among UK SMEs

Small and medium-sized businesses in the UK are increasingly confident they can source the funds needed to drive growth in 2018, new research shows.

The latest Aldermore Future Attitudes report reveals that three-quarters (75%) of SMEs, representing more than four million companies, are confident that they will be able to access the funding they need to grow their businesses over the next year, compared to 63% in Q4 2016.

A total of 42% think their business’ revenues will increase over the coming 12 months, compared to 39% for the same period last year, despite the ongoing uncertainty of Brexit negotiations.

Half of business owners who are expecting an increase in business revenues over the coming year plan to make this happen by increasing marketing efforts.

Carl D’Ammassa, group managing director, business finance, at Aldermore, said: “It is encouraging to see that optimism amongst SME leaders is increasing, with attitudes towards business revenues staying positive for the next 12 months.

“SMEs make an essential contribution to the UK economy and with Brexit discussions progressing, their ability to obtain finance and help support the growth of the UK economy will be crucial.

“Planning can be a difficult task, but to ensure ongoing success, every business owner needs to have a vision for growth and an understanding of how they would like to get there.”

Source: Asset Finance International

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A helping hand for small businesses

A decade after the credit crunch, too many small and medium-sized enterprises (SMEs) in the UK still feel their potential is being hampered by a lack of access to appropriate financing. The government’s Industrial Strategy report, published at the end of November, identified financing issues as a clear problem for SMEs that are looking to grow; surveys of sentiment continue to reveal frustration.

Research from Hitachi Capital Business Finance shows that two-thirds of SMEs with growth plans for the year ahead fear that their expansion plans could be derailed if they cannot secure appropriate finance. A third of SMEs applying for finance aren’t securing enough funding to underpin their investment plans, according to similar research from Close Brothers Group; a quarter of SMEs think funding is still too dear.

The answer may be alternative finance (alt-fi). Traditional lenders remain cautious about expanding their balance sheets, whereas alt-fi volumes are continuing to grow rapidly. A report from the Cambridge Centre for Alternative Finance (CCAF), based at Cambridge University’s Judge Business School, shows the market grew by 43% in 2016, with £4.6bn of funding generated, up from £3.2bn in the previous year. Around three-quarters of this cash went to start-ups and SMEs.

The CCAF suggests that the options for SMEs seeking alt-fi may be much broader than often imagined. Peer-to-peer (P2P) business lending, popularised by platforms such as Funding Circle and RateSetter, generated £1.23bn last year and was the single largest market segment, but other types of alt-fi made a significant impact too. P2P property lending raised almost £1.2bn, an 88% leap on 2015, while invoice trading delivered £452m of SME funding, and equity-based crowdfunding generated a further £272m.

It’s important that SMEs get more help to explore all their options. Under a scheme launched earlier this year, Britain’s banks, which reject as many as one in four applications for SME finance, are required to refer businesses that they turn down for funding to an online platform where alternative providers can offer their services. Several hundred SMEs have already benefited from the initiative, though there have also been concerns that leading banks aren’t fulfilling these requirements. On the right, we look at what to do if you’re turned down for finance.

What to do if your business is turned down for a loan

The big banks are rejecting around 100,000 small businesses each year, denying them access to £4bn of funding, according to figures from the British Business Bank. But if your business is turned down for finance, don’t despair – there may be steps you can take to get your application over the line. If you believe the rejection is unfair, you are entitled to appeal. UK banks now have to follow an appeals process laid down by regulators – independent monitoring of these cases suggests that significant numbers of SMEs are successful. If you’re certain that it is bank finance that your business requires, consider talking to other banks about a loan.

The alternative is to look at other types of funding. If a bank turns down your business for finance, it is now legally required to refer you to alternative providers via the bank referral scheme. With your permission, three online platforms are approved to receive these referrals. These platforms – Funding Options, Business Finance Compared and Funding Xchange – share your information with the alternative-finance providers registered with them in order to match you to a lender that can help.

Source: Money Week