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SME finance inquiry fighting ‘the last war’, says ICAEW

With the Treasury Select Committee investigating finance for small and medium-sized enterprises, ICAEW Head of Corporate Finance David Petrie argues that there are finance options available, but the right advice could be more important.

May 2018

Commenting on the Treasury Committee’s SME Finance Inquiry, Petrie said: “The select committee appears to be fighting the last war. Access to finance is not the problem it once was in the aftermath of the financial crisis, some 10 years ago. Relative economic stability, low interest rates and an increasingly competitive banking market means that many cash-generative businesses are spoilt for choice when it comes to securing high quality general banking and term debt facilities.

“Nonetheless, there are still many businesses which believe they should be advanced additional funding, but their bank takes a different view, often with good reason. Competitive pressure, instant access to online providers of debt and invoice finance and the government’s compulsory referral scheme are all serving to improve the position.”

Petrie argues that where the more serious problems in raising funding still and perhaps will always exist, is for enterprises lacking sufficient security, or where the technology and/or the market is not yet proven. According to Petrie, these companies require equity finance and a combination of relatively benign market conditions. This and previous governments have intervened to correct market deficiencies, and recent announcements have included even more generous allowances for so-called “knowledge intensive” businesses and a significant boost to dedicated long term equity funds, or “patient capital”.

As Petrie says: “While there will always be companies who believe they are deserving of additional funding, often what’s required is the right advice, not more cash. Some of these calls for more investment and intervention are now rather overdone.”

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