Member Article

Breedon Report outlines alternative finance for SMES

The taskforce employed to investigate alternative financing for SMEs has published its proposals for non-bank lending.

Tim Breedon, CEO of Legal & General, lead the independent review which examined a range of alternative and sustainable finance sources.

As bank lending is by far the biggest source of external finance currently used by businesses, the taskforce looked into the supply of non-bank lending to match the financial landscape of countries like the US.

Mr Breedon said that while there was no “silver bullet” to address the issue, he hoped the report would help to open up alternative channels for UK SMEs.

Recommendations were put to Vince Cable including a single brand and business support agency to deliver the Government’s range of SME finance programmes; the establishment of a Business Finance Advice network; consideration of the potential for the Government’s Business Finance Partnership to invest in innovative products such as mezzanine loan funds and peer to peer lending; and investigation of the impact of international prudential regulation on the supply of SME finance.

Business Secretary Vince Cable said: “We need to reshape the UK’s finance landscape to better serve the needs of ordinary businesses, helping more companies find the support they need to start and grow.

“Tim Breedon’s Taskforce has brought together industry, investors and advisers to provide evidence and ideas on increasing the range of finance sources available to small businesses.

“I thank them for their hard work and detailed recommendations, and I hope this will represent a turning point in business finance in this country.”

The report anticipates growth in demand for finance as the economy recovers, and the expected constraint on availability from banks as they deleverage, could create a ‘finance gap’ for business of £84bn to £191bn over the next five years.

John Cridland, CBI Director-General, remarked that it was encouraging to see proposals on opening up the UK bond markets to mid-sized firms.

He said: “Tim Breedon’s report argues a compelling case for the need to help our small and medium-sized businesses to access non-bank finance.

“Our report on future business champions said that, to achieve an extra £20 billion in growth potential by 2020, medium-sized firms must have access to new kinds of finance.

“This report confirms the scale of the challenge, and sets out practical steps needed to help these companies grow and create jobs.

“The Government must now work with businesses to drive this agenda forward, and we want the Chancellor to give these recommendations the serious attention they deserve in next week’s Budget.”

John Walker, National Chairman, Federation of Small Businesses, added: “We very much welcome this report as the recommendations chime closely with changes the FSB has called for to open up finance for small businesses.

“Bold action needs to be taken to ensure a behavioural shift so that small firms know what alternatives to bank finance are available.

“Putting the Government’s financial products under one umbrella organisation and looking at a pilot SME bond scheme, as well as learning what works well in other countries is a good step forward and we urge the Government to take forward the recommendations as soon as possible.”

This was posted in Bdaily's Members' News section by Tom Keighley .