Would you credit it? Lord Peter Mandelson

[Joanne Stuart]

Speaking to the IoD Director magazine this month, Lord Peter Mandelson, Secretary of State for Business explains why helping small firms access funds is his top priority


"The last time I contributed to Director—back in January—I'd just completed a series of talks with high-street banks to discuss small business finance. Economic conditions are still difficult for businesses and accessing finance remains an issue. But we are holding monthly meetings with lenders and will keep pressure on the banks to deliver.

The challenge is to deepen our understanding of what's needed to increase access to finance, while meeting business expectations that credit must be available and reasonably priced.

There are also products, such as the Enterprise Finance Guarantee (EFG), that will help companies on the margins of commercial lending. Since the EFG began in January, 6,410 businesses have been deemed eligible for EFG-backed loans, worth a potential £732m.

By significantly reducing the level of risk on banks, we are also facilitating funds that would not have been available. We've obtained commitments from both the Royal Bank of Scotland and Lloyds' Banking Group to provide an additional £27bn of business lending this year, with part of this specifically targeted towards SMEs. Other banks have also committed to increase lending during this period.

This government remains determined to ensure borrowers are treated fairly, especially in difficult times. The Small Business Finance Forum, which brings together banks and business representative bodies, provides us with an opportunity to discuss lending experiences with lenders and borrowers, as well as monitoring the overall availability, sector impact and price of lending. It is proving to be a very useful real-time feedback mechanism. Meanwhile, we have also announced the first companies to be awarded funds under the Capital for Enterprise Fund. Both companies—Nottingham-based KeTech and Glasgow-based Vamosa—are examples of companies with high-growth potential that will be important to our economy in the longer term.

Our aim is to gain stability across the whole financial market. Take insurance firms, which provide a vital source of support for businesses in such difficult economic times. In August, we extended the Trade Credit Insurance Top-Up Scheme, which provides temporary support for suppliers that have not been paid, in cases where insurers have reduced, but not completely withdrawn support. The extension widens the eligibility so that more firms can now benefit from a little breathing space to adjust to changing market circumstances.

We've also taken considerable steps to improve business cashflow, introducing the prompt payment code and tax relief on capital investments. There have been over 84,000 downloads of our cashflow management guides and there are now over 400 signatories to the prompt payment code, including 20 FTSE-100 companies. HM Revenues and Customs have established over 191,000 agreements with businesses to spread more than £3.3bn in tax payments, thereby freeing up funds to invest in their businesses at a time when they need it most.

In the coming weeks and months, we will continue to work closely with the UK's leading financial bodies to help businesses access the finance they need. Getting finance to SMEs remains this government's top priority, their economic support will be crucial in helping Britain climb out of recession."

[Michael Murray]

I think he picks his words very carefully “Since the EFG began in January, 6,410 businesses have been deemed eligible for EFG-backed loans, worth a potential £732m.” What we need to know is how many companies have actually received funding and what is the value of the actual loans? It would be useful to see this broken down by region. The IoD Northern Ireland banking survey showed that while there is greater knowledge about the schemes, only 2% of respondents have had an application under the Enterprise Finance Guarantee Scheme approved.

I also looked at the prompt payment code web site http://www.promptpaymentcode.org.uk only 2 organisations from Northern Ireland have registered - Northern Ireland Office and Ulster Bank. Perhaps this is why 61% of respondents to the banking survey reported that payment terms had increased with 82% having to wait over 31 days for payment.