Managing Your Cash Flow

SMEs need independent guidance on Government lending schemes

4 min read

28 January 2014

Last week MPs issued an announcement on Government initiatives to improve access to finance for small businesses.

The report warned that there is no real understanding about the areas where Government support can help SMEs, meaning that many are still reliant on credit cards and overdrafts. In my experience, despite the number of financing options available to early-stage businesses, the report is right.

The problem is that there’s so much information out there and that coupled with the sheer number of options available makes finding the right one for your business a real challenge. A bit like trying to hit the bullseye whilst wearing a blindfold, it’s easy to head in the wrong direction and end up missing the mark.

The same rule applies to other initiatives aimed at SMEs including, tax relief, mentoring and training schemes. Captify joined the Government’s new GrowthAccelerator programme around six months ago. This particular scheme aims to provide SMEs with the tools and connections to grow faster by offering mentoring, training and networking opportunities. 

There’s no doubt that some parts of it have been helpful, one being match funding for training of senior management, but we haven’t used all of the support available within the scheme because some of it just doesn’t map on to our needs. 

For example, when we started up we purposefully hired senior mentors because we knew it would help us to grow faster and develop better relationships within the industry, so we aren’t utilising that part of the GrowthAccelerator.

Whether it’s financing or mentoring and training support they’re after, small business owners are time-poor and they need better advice and guidance on what support options would deliver the best value. Each organisation has a specific set of needs and without proper guidance on what funding measure to take up, it’s easy to see why businesses will revert to the traditional route for generating capital – credit from the banks.

In a couple of months’ time the Business Bank will add over £1 billion into the pool of available funding, but early stage businesses won’t take up the offer unless the specific goal and availability of each Government-backed scheme are thoroughly communicated.

One way to encourage more awareness amongst the business community is to introduce more collaboration between the Government and high street banks. Banks are well positioned to provide a centralised consultancy service to SMEs, but at the moment use a one size fits all approach for the majority of early stage businesses. This means that they end up trying to offer the wrong kind of support, especially in an industry like ours where products aren’t a physical entity.

The good news is that there are signs of progress. The Silicon Valley Bank is a perfect example of how this can work in practice. Having opened its UK office in 2012, it’s starting to provide specialist financial services for UK technology start-ups and it’s this kind of approach that will give the British start-up community the support it needs in order to thrive.

If the banks were empowered to provide specialist advice and guidance for small businesses, more SMEs would take up the right funding and mentoring services, to the benefit of them and to the UK’s wider economy.

Adam Ludwin is co-founder and chief visionary officer at Captify