BIS has put together a package of support to address the cash flow, credit and capital needs of small- and medium-sized businesses. Three initiatives were launched in January 2009: Enterprise Finance Guarantee, Capital for Enterprise Fund and Working Capital Scheme. Other measures promote and monitor lending by banks, while a specific package is targeted at the automotive industry.
The Enterprise Finance Guarantee offers targeted support for businesses struggling to secure the finance they need through normal, commercial lending. It offers a 75 per cent Government guarantee on loans of up to £1 million to viable businesses with less than £25 million turnover. The £1 billion of Government guarantees will secure up to £1.3 billion of additional bank loans.
The scheme was extended in May to help improve lending to businesses and social enterprises in disadvantaged areas. The changes will provide extra support to Community Development Finance Institutions by enabling them to access bank loans, worth up to £20 million, through the Enterprise Finance Guarantee scheme.
The Capital for Enterprise Fund offers viable small businesses with high levels of existing debt help to raise long-term finance. It provides companies with equity investment which they can use to pay off existing debt or invest in their business. The £75 million fund is made up of £50 million from Government and £25 million from the banks.
The Working Capital Scheme is not directly accessible by companies, but is designed to increase the amount of lending on offer.
The Government will provide guarantees covering 50 per cent of the risk on existing and new working capital portfolios presented to it by the banks. The first £1 billion tranche of guarantees will secure £2 billion of short term bank lending to companies with a turnover of up to £500 million a year. This is freeing up capital which the banks must use for new business lending that would otherwise not be available.
Also delivered under the Working Capital Scheme is a trade credit insurance top-up scheme. The scheme provides additional trade credit insurance to businesses whose credit insurance cover has been reduced by their provider. It will help mitigate the cash flow and working capital constraints caused by the withdrawal of trade credit insurance.
- Real Help for Business
- Government business support providing real help
- Enterprise finance guarantee scheme to extend lending to businesses and social enterprises
- Government’s trade credit insurance top up scheme goes live
- Extension to Government’s trade credit insurance top-up scheme
The Government is working with UK banks behind the scenes to free up bank lending. Lloyds Banking Group and RBS have committed to increase business lending by £27 billion, with other financial institutions also pledging increases. Government is also helping banks access loans worth up to £4 billion from the European Investment Bank for lending to small and medium-sized UK companies.
BIS, together with other Government department and the Bank of England, is continuing to monitor the lending commitments. BIS has also formed a new panel, the Small Business Finance Forum, to monitor how banks are lending to small businesses.
Specific support has been offered to the motor industry. The Automotive Assistance Programme is a £2.3 billion package of loans and loan guarantees, consisting of £1 billion in Government guarantees and £1.3 billion from the European Investment Bank. It is set up to provide access to finance for viable businesses with turnovers in excess of £25 million in the UK’s automotive and automotive supply sectors to encourage investment in new green technology development projects.
A scrappage scheme was also unveiled in the Budget, offering consumers buying new vehicles a £2,000 discount when vehicles over 10 years old which they have had for at least 12 months are scrapped when the new car is delivered.
More information on the automotive sector is available on the BIS website:
A range of advice is on offer to businesses to help them ensure they are in the best shape to get through the recession. Business support has been simplified so that Business Link is now the first port of call for information and introduction to specialist expertise from the private, public and voluntary sectors.
Support includes business health checks; a streamlined portfolio of Government-funded grants, loans and advice schemes called Solutions for Business; and help to increase productivity and flexibility by improving the support available to help with skills and training.
Business Link offers a health check service, which enables business to get a free review with a professional business adviser for hands-on advice and help accessing the full range of Government support. A health check will help ensure that firms are maximising their cash flow, marketing and business planning during the current economic climate. There is also an online interactive health check at www.businesslink.gov.uk/healthcheck.
The Government, led by BIS, has streamlined the number of Government-funded grants, loans and advice schemes it offers from over 3,000 to an opening 30 to make it easier for businesses to get help. The Solutions for Business portfolio simplifies and brings together the support offered by Government departments, their agencies, Regional Development Agencies and local authorities in England. Solutions for Business products can help companies with common business issues such as getting started, growing, finance, export, skills, innovation and the environment. Information is available at www.businesslink.gov.uk/solutions.
As part of the Solutions for Business initiative, the Train to Gain skills brokerage service has come together with Business Link. Train to Gain provides Government funding and free, independent advice to businesses of all sizes to help improve the skills of their employees and boost the productivity of their business. Extra support is available for small and medium-sized businesses and third sector organisations, including funding to retrain employees, access to short courses in business-critical areas and leadership and management training.
Apprentices can bring many benefits to businesses, including increased productivity, improved competitiveness and a committed and competent workforce. Full or partial financial support is available for training up to the equivalent of A level. For more information, visit the Apprenticeships website.
Colleges and universities are also working with local businesses to provide training which is tailored and has the flexibility businesses needs. The Training Gateway provides information about all professional development, corporate, vocational and executive training available from UK Universities.
Sector Skills Councils can also give specialist advice and access to extra and more flexible funding to meet the needs of your specific sector. Visit the Alliance of Sector Skills Councils’ website for contacts.
- Make ‘Business Health Check’ a New Year’s resolution
- Solutions for Business simplifies Government business support, reducing over 3,000 schemes to 30
- Help for employers to prepare for the upturn
Late payment can have a devastating impact on businesses. The average payment period in the UK is 23 days beyond the agreed terms – up three days in the past year – and a quarter of businesses which fail report late payment as the main cause.
Government has committed central Departments to pay within 10 days and nine out of 10 invoices are now paid within that timescale – ensuring up to £66 billion in payments reaches business quicker than ever. BIS is now working in partnership with the Regional Economic Forums to promote prompt payment across the wider public sector, and a third of local authorities are reporting that they too are now paying within 10 days.
Over half of all business transactions in the UK are not covered by pre-agreed payment terms. BIS has joined forces with the Institute of Credit Management and the five leading business organisations to create 10 guides on managing cash flow. We are also supporting a new prompt payment code that commits signatories to pay suppliers on time, give clear guidance to suppliers and encourage good practice. Over 200 companies have already committed to the code.