Wizards don't have all the answers
Recent headlines have pointed accusatory fingers at the
banks for not achieving their targets under the Merlin
There are, and I suspect always will be, arguments from both
business and the banks as to why this has happened and whether the
topline figures paint an accurate picture.
Achieving a consensus is unlikely - lies, damn lies and
statistics springs to mind.
Better then to look forward by recognising that while improved
access to more varied sources of finance would help SMEs and the
wider economy, the barriers to increasing non-bank lending also
need to be tackled.
While banks will remain an important part of the funding
landscape, growing firms also need 'patient' capital, with a longer
investment return horizon.
To deliver this, we need to give our firms access to new sources
of funding, in addition to the government's £1 billion of Business
This is as much a problem of demand as supply. Firms need
independent help and support to locate the finance that's right for
So we must cut through the red tape and complexity surrounding
non-bank finance to make it more easily understood and to make it
simpler for alternative lenders to judge the credit worthiness of
To increase the amount of funding available for medium-sized
businesses, the recommendation would be that the government
establishes a mid-sized bond market in the UK, using a mix of new
infrastructure and tax incentives.
Retail interest can then be stimulated in mid-sized businesses'
bonds through new tax-free savings in an ISA. Short-term tax
incentives, similar to Venture Capital Trusts, could be used to
encourage investment in the new bonds.
Combating a lack of awareness among SMEs about sources of
non-bank finance will be vital to help stimulate demand.
Only around 10% of these businesses seek asset-based finance and
fewer than 5% choose bond or mezzanine finance.
The existing programme of Independent Financial Advisers (IFAs),
which serves consumers, should be expanded to meet the needs of
The government should work with the financial services sector to
help make non-bank finance much less complex and bureaucratic.
Vince Cable is on board and has set up a taskforce which will
work with businesses, lenders, investors and providers of
alternative finance to examine structural and behavioural barriers
to raising non-bank finance.
It will set out what steps are needed to ensure businesses can
access a wider range of alternative finance sources.
The CBI has given its input ... over to you Vince!