Small business lending figures no comfort to many businesses


Small business lending
Chief executive
Responsible Finance
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The recuperation continues. Retail bankers – for several years a convenient pantomime villain of the press – received plaudits this week after the British Business Bank’s Small Business Finance Markets Report revealed that lending to small and medium-sized businesses is growing for the first time since the recession.
But the figures also show a continuing problem: businesses of less than 50 employees are still struggling to borrow. And businesses of less than five years old had a 50% rejection rate from the banks.
Think of the missed opportunities: the jobs not created, the wealth not circulating in local economies.
Keith Morgan, the British Business Bank’s chief executive, says more needs to be done and Anna Soubry, small business minister, told the FT that “even though the lending landscape is improving, I’m well aware access to finance remains a big issue and want to see even more help for small firms looking to invest and create jobs for people”.
So take action. There is a group of organisations with a proven record of supporting businesses and creating jobs in local communities.
Responsible finance providers were formerly known as "community development finance institutions" and support businesses, social enterprises and individuals all over the UK, serving customers not supported by mainstream lenders, including creditworthy businesses turned down by banks.

Social enterprises themselves, responsible finance providers reinvest profits in their local areas to deliver economic and social benefits.

These responsible finance providers are working throughout the UK, and in 2015 they lent £224m to 11,894 businesses and social enterprises turned down by mainstream lenders, creating and protecting over 25,000 jobs.
They are lending to creditworthy businesses and providing more than just “responsible” finance: they offer support and expertise; have a compounded economic impact since they often lend in underinvested areas and end up creating returns of, on average, seven times the value of their investments; and they could do even more.
But they are already dealing with a dramatic surge in demand – their lending to small businesses, social enterprises and local communities rose by 45% last year and in 2015 there were nearly 50,000 enquiries from businesses.
To deal with this demand these responsible finance providers need to be treated as a crucial part of the engine for regional and local growth, rather than a sticking plaster.
If Soubry is serious about wanting to see more help for small firms looking to invest and create jobs for people then government must endorse responsible finance more.
And the British Business Bank, proudly proclaiming its £100m Help to Grow scheme and £400m Northern Powerhouse fund, must ensure these schemes deliver investment through providers of responsible finance.
I welcome the news that mainstream banks are investing more. But with their own evidence demonstrating they cannot fully meet the needs of the small businesses of the UK, responsible finance providers – our members – will continue to fill in the gaps.
The British Business Bank, Local Enterprise Partnerships and Government should be clear; 50% of the small business community can’t currently access the finance it needs.
And the only way to ensure that this 50% can access investment from the Northern Powerhouse Fund, the Help to Grow scheme and other regionally targeted funds, will be to deploy these funds through responsible finance providers.


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