Greater Manchester SMEs urged to look beyond the banks for access to funding

Enterprise Europe Network North West (EENW)

A continued fall in bank lending to SMEs could be crippling Greater Manchester businesses unnecessarily because companies are not making enough use of other funding streams.

That’s the stark warning from Enterprise Europe Network North West (EENW), the public sector body that offers help to SMEs in identifying suitable funding options and expanding their businesses overseas. The warning follows the latest Access to Funding survey by the European Commission and European Central Bank, which found that 15 per cent of small businesses see access to finance as one of their most challenging business concerns.

Andrew North, innovation adviser at EENW, explains: “While the latest monthly figures from the Bank of England show lending to big firms increasing by £1.1 billion for big firms, the story is very different for smaller businesses. SME’s experienced a fall in lending from banks of £383 million during the same period and repaid more than they borrowed for the third month running.

“On the face of it, this presents a very bleak picture for the North West’s SMEs but if we return to the Access to Finance study, 32 per cent of UK respondents reported that they had received finance from non-bank sources including government, microfinance institutions and private investors. More companies in Greater Manchester need to do the same to capitalise on growth opportunities as the economy recovers.”

Part of EENW’s role is to signpost SMEs in the region to sources of funding and to highlight new funding streams that become available. Amongst these is ‘Growth Vouchers’, a pilot scheme launched by the Department for Business Innovation & Skills (BIS), which begins in January 2014 for a year-long trial. Under the scheme micro and small businesses will receive vouchers for £2,000 which they must be willing to match fund and use to seek external business advice geared towards encouraging growth. The pilot will be operated as random controlled trials (RCT) that will measure the effects of the innovative approach to funding on participants’ bottom lines.

Horizon 2020 is another new funding stream that will come into force in 2014, providing a €70 billion pot that can be accessed by SMEs across the EU. The first round of funding will be awarded in early 2014 and the initiative will run until 2020, with grants awarded for research and development projects aimed at creating growth.

North West SMEs already benefit from the North West Fund, a £155 million evergreen investment fund that provides finance to companies that have been unable to access capital investment from traditional sources. The body awards funding from £50,000 to £2 million to enable companies to set up, develop and grow with six individual funds tailored to the varied needs of a wide range of businesses.

Mr North adds: “The effects of the banking sector’s reluctance to lend to SMEs grabs the headlines but companies need to look beyond that to find out what options are available. They may be pleasantly surprised to find that there are many other sources of grants, loans and investment capital available and we can help them identify their options.”