The report, published today (September 19th 2012), says that the hardest amounts to raise are between £500,000 and £2m, as that is too much to find informally and too little to interest investors, thereby leaving the banks as the best source of cash.
But the British Bankers’ Association (BBA) says that most SMEs “do not need, or want, external funding...”
The truth may be somewhere in the middle but certainly other recent surveys have found that the reason why SMEs aren’t asking for loans is that they know they will probably be refused or will have to pay punitive interest rates.
While there is talk of a state bank being set up specifically to help business, the IPPR has gone a step further and is suggesting a merged bank to deal with all of the UK’s funding needs.
At the moment, the Government has already agreed to a Green Investment Bank to fund long-term sustainable growth consistent with the UK’s climate change objectives.
There is now talk of a Business Bank to provide the funding the traditional banks aren’t.
However, the IPPR’s proposal is for a ‘British Investment Bank’, which would lend to both sectors, be 100 percent state owned and allowed to raise funds on capital markets by issuing bonds, which has already been done successfully in Brazil.
According to the IPPR, a merged infrastructure and business-lending bank would diversify the business and have the benefit of providing regular low-risk returns from some of the infrastructure projects.
For more information, please visit www.rickardkeen.com
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