Entrepreneurs are still finding it difficult to access funding to assist their businesses, according to Birmingham Chamber of Commerce and Industry.
The BCI was responding to the Government’s consultation paper Bridging the Finance Gap. After consulting member companies, the organisation found that smaller firms in particular are having the greatest difficulty in finding venture capital.
Debbie Walsh, policy manager at BCI, said there is definitely a finance gap and small businesses are the most affected.
‘One of the reasons for this appears to be that while raising capital at any level can be difficult, venture capital, below say pounds 2 million, is not generally economically viable for the commercial market,’ she said.
‘There is a range of options already available for the very small start ups, although there also appears to be a culture of needing to find seed corn equity from friends and family before venturing further.’
Ms Walsh added that small business investment companies do offer a good start but there needs to be recognition of their limitations.
In addition, she said, there needs to be enough prospects in the company for people to put in hard earned money at a time when they are becoming increasingly averse to risk .
‘Our research has also suggested that the real missing gap is not finance but taxation. An entrepreneur will be reluctant to risk hard- earned tax-paid money in risky investments where he is going to share half the profits with government debt,’ she said.
‘Some kind of tax write-off, whether at the start or end of the investment and whether full or incremental would be welcome.’ Meanwhile, the Association of Chartered Certified Accountants has warned that high street banks must change their approach if the Government’s Small Firm Loan Guarantee (SFLG) is to be used more widely by businesses.
The system also needs to be simplified and the administrative burden reduced by introducing greater flexibility, clarity and transparency.
This concerning the right of appeal and guidance on how to apply The views expressed by ACCA were also in response to the Treasury’s Small Business Service consultation document.
An ACCA members’ survey earlier this year found that 51 per cent of respondents believed the SFLG to be unsuccessful in meeting its objectives.
