39/01
2 April 2001
Small Business must improve its Investment Readiness - Small Business Service
Investment readiness: helping enterprises access equity finance for growth consultation document was launched today by David Irwin, Chief Executive of the Small Business Service and Financial Secretary, Stephen Timms, to find out how small business can be helped to become more ?investment ready? and therefore attract outside risk finance.
Small businesses require finance to start, develop, and grew. Research shows that there is a mismatch between increased supply of finance to small firms, and their ability to use it properly.
David Irwin said:
If more small firms are to take advantage of the increased availability of risk capital in the UK, they will need a better understanding of how this type of finance works as well as advice on how to secure and manage such an investment.
Stephen Timms said:
Small businesses are the future growth and wealth providers of the UK. They need to be ready and able to access finance, without it they cannot develop and grow. The finance for investment in small business is there, small businesses cannot or do not know how to access it. This problem must be tackled if Britain is to improve its productivity performance.?
This initiative comes against a background of growing supply of early stage risk capital in the UK. Government is stimulating this growth through various channels, for example via recent reforms to capital gains tax, the Enterprise Investment Scheme, and Venture Capital Trusts. To complement this, SBS plans to roll out in the next few months support for a network of Regional Venture Capital Funds. Small firms have greater opportunities to access equity finance, but this market could be improved if the blockages in the system are removed.
The Small Business Service (SBS) plans to launch in the Summer a series of pilot initiatives aimed at improving small businesses investment readiness. These proposals sit along side the changes the government has made to improve the tax incentives for individuals to invest in smaller businesses.
Notes to Editors
Copies of the consultation document are being sent to banks and other finance providers, accountants, Regional Development Agencies, enterprise agencies, Business Links and small firms representatives.
Additional copies can be obtained from Bill Barrott, SBS Investment Directorate, St Mary's House, c/o Moorfoot, Sheffield S1 4PQ, telephone (0114) 259 7325.
The full text of the document can also be accessed by clicking on the link to the Business Advice website below.
External links
The recent White Paper ?Opportunity for All in a World of Change? announced that the Small Business Service (SBS) would, by the Summer, launch a set of initiatives to help small businesses understand external investment better and become better prepared to take it on. The Budget Report of 7 March also highlighted the need for Government to help SMEs improve their ?investment readiness?, in order to make the risk capital market for enterprises work more efficiently and effectively.
The Treasury and the SBS have recently taken a number of measures aimed at increasing the supply of finance, particularly risk capital, to growth businesses in the UK, including the creation of regional venture capital funds. To ensure that as many small businesses as possible can take advantage of these it is important that they have a better understanding of equity finance and are given help to secure and manage this type of investment.
The consultation paper invites comments and suggestions from interested parties on a number of issues relating to the investment readiness of SMEs, including the size, sector and stage of business that are most affected; what ?investment readiness? activities currently take place, which public-funded agencies are involved in this work and whether such activities are effective; what definitions are currently used for that group of SMEs who would benefit from such advice; which mechanisms work well in publicising ?investment readiness? activities to SMEs; the pros and cons of providing such advice in-house, as opposed to contracting it out and what typical fee structures are used in ?investment ready? services.
The closing date for responses to the consultation exercise is 11 May 2001.