Member Article

Intermediaries must be aware of Breedon Report propsals

The Breedon Report may fail if more is not done to educate intermediaries on the funding support available to SME clients, according to a new report.

Touch Financial made these comments following the publication of the Breedon Report into alternatives to bank finance for SMEs. While the recommendations have been welcomed,

Simon Carter, director of Touch Financial is now calling on the Government to work closely with banks, professional accounting bodies and advisors to accelerate the adoption of invoice finance, or face the risk of undoing good intentions.

He commented: “We have been here before when the Government decided it would oblige banks to lend as part of Project Merlin.

“At the time we said that Government – and perhaps some of the banks – missed a huge opportunity to promote the value of invoice finance as a viable alternative to the ‘traditional’ overdraft that so many businesses were being refused.”

One of the key recommendations of the report is for the banks to ensure that they recognise the powers they have within their own subsidiaries to help clients with access to invoice finance - or risk running into difficulties.

“Now at last invoice finance is on the agenda, but to what extent it is championed will be dictated by the understanding of the product by those in a position to promote it.” Simon continued. “And in our experience, that understanding is not at the levels it needs to be to really help SMEs with their current funding issues.”

Research by Touch Financial also indicated that one in six small businesses have had their overdraft facility removed without being offered an alternative. For many this is the is only form of cashflow available.

Mr Carter said: “Removing or restructuring an overdraft is understandable in certain cases.

“Removing an overdraft without offering an alternative, however, is somehow more difficult to explain or excuse.”

In the handful of cases where businesses were offered alternatives, 10% were offered loans, 10% invoice discounting, and 5% factoring. Perhaps of more concern, however, was the lack of knowledge of where to go to seek further advice:

“At a time when the Government’s re-organisation of Business Links appears to be in disarray, it is now up to the banks and accountants to provide much more leadership in terms of helping small businesses,” Simon concludes.

This was posted in Bdaily's Members' News section by Ruth Mitchell .