How it warms the heart to see the Department for Business, Energy and Industrial Strategy (BEIS) putting help for SMEs high on the Brexit agenda. Apparently, we are even going to have a new Business Finance Council created specifically for the purpose of helping needy smaller businesses survive the difficult times that lie ahead. It all sounds very laudable.
The only thing preventing me from wiping an emotional tear from my eye is the list of organisations that assembled at the recent Cabinet Office meeting. With only one or two exceptions, they were all banks – the same lot who ran in the opposite direction a decade or so ago, leaving SMEs hung out to dry during the banking crisis. Difficult to leave the banks out, I know, especially with them still miraculously holding on to their monopoly position. But shouldn’t there at least be some semblance of balance to represent the marketplace as it is today?
It is surely right to remind everyone of the Government’s existing guarantee schemes – Enterprise Finance Guarantee and Enable – which help good companies with inadequate security to obtain the finance they need and lenders to lend more without additional balance sheet risk. These schemes have capacity and there is no argument that they should be used to the maximum.
But, in case you haven’t noticed, the market for lending in this country has been undergoing a revolution. P2P platforms like ArchOver came into being in the first place to fill the gap left by banks running for cover. And, despite best efforts from some quarters to stem the tide, that revolution (evolution?) is ongoing.
Partly because, in my opinion, the banks’ appetite for lending to SMEs hasn’t really changed, and because investors’ hunger for yield is, if anything, even stronger, the P2P model has a bright future. The only proviso is that P2P platforms must match their operational speed with robust credit processes to weed out dodgy loan applications. After all, we haven’t set ourselves up to go bust, either – we wouldn’t qualify to be bailed out by the taxpayer.
However, what I would ask is that, when the new Business Finance Council is created, the membership is representative of the real marketplace. We don’t need another cosy club whose only interest is to maintain the status quo.