70 Nearly half of small firms within the retail and wholesale sector (47 percent) said that, in their view, access to new credit was either “poor” or “very poor”, while only around one in six small retail and wholesale businesses (17 percent) rated it as “good” or “very good”, according to FSB’s Small Business Index research in the second quarter of this year. However, in welcome news, gift shop owners thinking about expanding or renovating their business with help from a loan may find their funding options have widened in the near future, thanks to the announcement of an expansion to the British Business Bank’s Growth Guarantee Scheme. The scheme provides a 70 percent Government guarantee on commercial loans of up to £2 million. It will now support an additional £2 billion of SME lending each year by 2028/29, taking annual lending backed through the scheme from £1.35 billion to £3.35 billion. The Government is also increasing the maximum repayment term from six to 10 years, for loans of up to £1.1 million. The British Business Bank estimates these changes will increase the number of firms supported from 8,000 to 20,000 by 2028/29. Growing the number of enterprises which can access the scheme will help to build wealth and create opportunities in high streets and communities across the country. Community-based lending Community-based lending has significant room for expansion, with levels in the UK lagging behind those in many other comparable countries. Getting more Community Development Finance Institutions (CDFIs) – that is, not-for-profit lenders with a remit to extend funding to local businesses and entrepreneurs, especially those from currently underserved groups – accredited to lend through the Growth Guarantee Scheme will help to expand the finance options available to small firms from a variety of backgrounds. Based in local areas, CDFIs have the potential to become rooted within their business communities, providing the finance to firms based nearby and growing alongside them, thus helping to create more resilient and more ambitious local business networks. The blanket use of personal guarantees when lending to small businesses – even for relatively small amounts – is, however, an issue which needs to be addressed. Our research shows 60 percent of limited company directors would borrow to grow their business if they did not have to put personal assets at risk. Personal guarantees have their place, but they should not become the default for loans where the risks do not justify it, as they turn a business loan into a personal liability, and understandably deter business owners from the risk-taking that is needed on a national level to make our business community more vibrant and dynamic. That is why FSB has been working with the British Business Bank as it develops its code of conduct for Growth Guarantee Scheme lenders. It is vital that this code reassures potential borrowers on personal guarantees, and ensures personal guarantees are used only where they are genuinely necessary. Expanding the Growth Guarantee Scheme is an important step in the right direction, and one FSB has consistently championed. Now the focus should be on making sure businesses can borrow with confidence. Finance should help business owners invest in their future, not force them to gamble everything they own in the process. FSB Policy Chair Tina McKenzie looks at how economic growth depends on businesses having both the confidence and the means to invest – for many, that starts with access to finance ECONOMIC GROWTH ABOUT FSB As the UK’s business support group, FSB is the voice of the UK’s small businesses and the self-employed. Established over 40 years ago to help its members succeed in business, FSB is a non-profit making and non-party political organisation that’s led by its members, for its members. As the UK’s leading business campaigner, FSB is focused on delivering change which supports smaller businesses to grow and succeed. FSB offers members a wide range of vital business services, including access to finance, business banking, legal advice and support along with a powerful voice in Government. Each year FSB also runs the UK’s Celebrating Small Business Awards. More information is available at www.fsb.org.uk. You can follow us on twitter @fsb_policy and on Instagram @fsb_uk.
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