Sally Goodsell, CEO of regional funding organisation Finance South East, looks at what Government-secured loans might mean for SMEs.

Peter Mandelson’s recent announcement of £20bn of Government-secured loans for SMEs divided opinion. Given the scale of the economic challenges is this enough to help companies retain business and even grow?

You don’t have to look far to see how the lack of credit is affecting businesses trying to secure or renew bank funding. In the last quarter of 2008, according to the Forum of Private Business (FPB), 33 per cent of small businesses sought finance and of those around 47 per cent were either partially or completely rejected by UK lenders.

The new Government scheme hopes to get credit moving by removing the risk associated with loan defaults should businesses go bankrupt but the scheme’s ability to stimulate recovery may well depend on whether individual SMEs can find good business opportunities in the new climate. These are loans not grants and can’t rescue an enterprise struggling with its core strategy, yet it could be just the helping hand needed for those incapacitated by the lack of credit.

I feel positive about the funding being made available for ambitious businesses and am excited about the role my own organisation, Finance South East (FSE), has to play in helping businesses through this difficult time. The recently set up Transition Fund, which is funded by SEEDA and managed by FSE, provides loans to high-growth SMEs having difficulty obtaining finance from the commercial sector and while it’s still early days, initial successes highlight how Government-backed loans can work.

Finance South East continues to assist businesses at all stages of development, providing finance for a variety of activities. Current funds and services under management include:

• Accelerator Fund: a £10m mezzanine loan fund providing up to £200,000 for a range of growth activities
• South East Seed Fund: a £5m equity fund investing up to £250,000 on a matched-funding basis to SMEs, including university spin-ins/spin-outs
• Commercialisation Fund: a £3m fund providing repayable finance of up to £60,000 for proof-of-concept and commercialisation activities
• Transition Fund: providing loans of up to £150,000 to established SMEs
• Grant for R&D: helps start-ups and SMEs carry out research and development work on technologically innovative products and processes
• GBI (Grant for Business Investment): a discretionary grant scheme typically providing 10-15% of a project’s eligible capital expenditure
• South East Capital Alliance (SECA): a business angel network introducing high quality, investment ready companies to potential investors from across the region

http://www.financesoutheast.com