The government is looking to increase the options for small and medium-sized businesses looking for finance, it was announced yesterday.
In a discussion paper launched by the Treasury, the government is asking businesses to give their views on how to increase the options for smaller firms looking for growth capital, with the intention of introducing proposals for reform later this year.
The paper, entitled ‘Developing non-bank lending channels for UK businesses’ is calling on entrepreneurs and investors to identify the barriers hindering the development of more diverse sources of financing for firms. In particular, the Treasury is looking to increase the supply of debt finance from non-bank lenders.
“Here in the UK, our large corporations have had a great deal of success in accessing finance directly from credit markets with a surge in corporate bond issuances,” said Paul Myners, financial services secretary to the Treasury.
“Smaller firms, however, have not been able to similarly replace bank lending by directly tapping financial markets or non-bank financing.
“A more diverse funding market, where large and mid-size firms can go directly to markets or have options other than banks when they are looking for support, would clearly be an advantage to the UK economy, not just in economic slowdowns.”
Myners said that the “extraordinary events” in the credit markets over the past two years have shown that the continued availability of any single form of business finance cannot be taken for granted.
“Right across the world, firms that had relied on loans from banks to finance their operations found themselves in a very difficult situation when bank lending contracted,” he added.
The discussion paper also covers areas such as the credit assessment and monitoring process, transparency in the pricing of bank loans, the factors underpinning UK investor preferences, and loan and bond market infrastructure.
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www.hm-treasury.gov.uk/fin_non_banking.htm© Crimson Business Ltd. 2010