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Funding uncertainty for small business

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20th Mar 2013
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While the Chancellor announced a whole raft of investment incentives for businesses today, there was very little detail in the Budget to tackle the small business funding crisis.

George Osborne said Britain was “open for business” with a further corporation tax reduction and the creation of the Employment Allowance, which will reduce each company's NIC bill by £2,000, however he didn’t go far enough in addressing the lending issue.

Despite passing references to the new Business Bank, the Funding For Lending scheme and Growth Vouchers, the lack of detail in the Budget comes as a major disappointment for many small business owners.

A recent survey from TaxAssist showed that access to funding was a top priority for local companies. TaxAssist’s Jo Nockels said: “We’ll be looking closely at the proposed Growth Vouchers for small businesses and possible extensions to the Funding for Lending Scheme, but hoped to hear much more about lending lifelines for small businesses.

“There was also a deafening silence on business rates, which we wanted to see frozen at least and nothing concrete on extending small business rate relief, which is due to come to an end next March. This would be a bitter blow to many business owners,” Nockels said.

Growth Vouchers

The government has allocated £30m for a Growth Vouchers programme in England. According to the Treasury Budget document, this programme will test a variety of innovative approaches to helping SMEs overcome barriers to achieving growth, such as limited use of external advice. It will target a number of specific areas of advice such as making a successful loan application to a bank or taking on an employee.

Businesses are expected to be able to spend it with a list of approved advisers, which could extend to accountants.

Business Bank

On the new Business Bank, the government is publishing the first strategy for the bank which sets out an accelerated timetable for how it will deploy £1bn of new capital, improve existing schemes and develop a lasting new institution to support SME growth by the end of 2014, according to the Treasury document.

Adam Tavener, chairman of Pensionledfunding.com, said the Budget was “too vague” on the Funding for Lending scheme and Business Bank, and added that the government was only offering two or three billion pounds in total for small business lending.

“The FLS extension could be good news for SMEs which make up 90% of the UK’s total business economy, but this in only a ‘maybe’ from the Chancellor,” Tavener said. “His focus on tax incentives - including the £2k NIC Employment Allowance - doesn’t help SMEs with their funding needs for long-term growth and therefore these initiatives are also unlikely to meet the Chancellors’ objective of creating a further 600,000 private sector jobs in 2013.”

Clive Lewis, head of enterprise at the ICAEW, was sceptical about the government plans: “The key acid test for these schemes is that they provide finance for business at a decent cost. Any finance needs to be paired with professional business advice. At the moment there are too many schemes, bewildering for small businesses,” he said.

Help to Buy

The Chancellor did announce £5.4bn of financial support for the housing market through the introduction of the Help to Buy scheme.

The government will extend its First Buy initiative to all those who buy a new build home and will provide an equity loan worth up to 20% of the value of a new build home, repayable once the home is sold.

It will also create a mortgage guarantee for lenders who offer mortgages to people with a deposit of between 5% and 20% on homes with a value of up to £600,000, which will increase the availability of mortgages on new or existing properties for those with small deposits.

Brendan Sharkey, head of MHA MacIntyre Hudson’s Property and Construction group said mortgage finance has been difficult to secure in recent years, leading to stagnation in much of the housing market.

“First time buyers and those looking to move up the housing ladder should benefit: we look forward to seeing the scheme provide significant support in practice.”

Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club added: “These initiatives reinforce the effect of last year’s Funding For Lending Scheme which has already leveraged off the government’s balance sheet to provide major support to housing and the wider economy.”

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