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Barclays has made another £88 million of business loans available to small firms through the government's Enterprise Finance Guarantee (EFG), introduced during the downturn to help companies struggling to raise funds.

Lord Davies – the trade, investment and small business minister – says the EFG has already helped "thousands of viable businesses" access the cash they need to withstand the recession and prepare for recovery.

"Following its recent extension, it will continue to play a vital role in encouraging enterprise and investment and driving productivity and growth throughout the UK economy," he adds.

Barclays, which has made loans worth over £150 million available in the last year, says it's been able to assist more than 1,650 businesses through the scheme.

"Enterprise Finance Guarantee covers a key gap in the market – companies that are viable, notes Steve Cooper from Barclays Local Business.

Through the business lending scheme, the government guarantees a proportion of the sum if the customer is unable to repay the debt. It was launched for businesses that operate in the UK and have sales turnover of up to £25 million.

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Confederation of British Industry (CBI) figures have highlighted that manufacturing production rose for the first time in two years in the three months to January, and now a billion-pound fund has been launched to keep the sector buoyed up.

Representatives for RBS/NatWest say the loans are being made available following feedback from customers in the industry who are anticipating growing demand for their products during 2010 and beyond.

It marks the latest in a series of initiatives launched by the bank to support UK businesses, including an SME Customer Charter, a customer support helpline and a price promise and committed overdrafts for small firms.

Peter Ibbetson, chairman of business banking at NatWest and RBS, says firms will have the option to defer loan repayments for up to three years.

"As we see many of our manufacturing customers turning their thoughts to investment in order to drive competitiveness, we want to send a clear message of support to them by creating a fund that is designed specifically to enable that investment," he explains.

According to the CBI data, the boost to manufacturing output came as a rise in new expert orders offset weak domestic demand.

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Do you own a small business? Having problems raising finance? NatWest and RBS are here to help! And all through the launch of a new "SME customer charter".

The banks say they're aiming to boost support for their 1.2 million business banking customers with the charter, which promises to lower overdraft rates, make fees more transparent and extend free banking so more start-ups have a chance to establish themselves.

"Access to finance at fair prices sits at the top of many businesses' wish list, which is why we are extending our overdraft price promise and offering reassurance and transparency on the fees we charge," says small business chairman Peter Ibbetson. "At the same time it's equally important we do all we can to help develop new businesses by extending our free banking offer."

Ibbetson's figures show NatWest and RBS have lent £60 billion to small and medium-sized firms over the last two years, as well as "leading the way" on lending via the government's Enterprise Finance Guarantee scheme.

The Federation of Small Businesses has welcomed the charter, pointing out that "businesses need to know that their credit lines are safe" – and how much they'll cost.

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From Enterprise Tsar to small-screen Dragon: there must be something in the air prompting familiar faces to throw their two cents' worth on small businesses' finance woes into the ring.

After The Apprentice star Lord Alan Sugar was pilloried for deeming struggling small-firm owners "moaners", fellow entrepreneur Duncan Bannatyne has spoken out in support of the very same recession-hit demographic.

There should be better and easier access to business credit cards and bank accounts, he's declared, as Britain's smaller companies attempt to stay afloat.

Dragons' Den star Bannatyne knows what it feels like to face uncertainty, is the thing. As he reveals in the Telegraph, he once had to borrow £30,000 on three personal credit cards – as well as selling his house and car – because of difficulties raising finance for his fledgling enterprise.

Now the successful (multi-millionaire) founder and chairman of Bannatyne Fitness, he nonetheless understands that, to most small business owners, banks seem intent on making life particularly difficult – even as many of them report "bumper profits".

"Banks could do more to help small businesses and their employees who will be seeking assurances over the festive period," he concludes.

Do you hear that, bank bosses?

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It could be good news from Royal Bank of Scotland (RBS) for cash-strapped small businesses this week.

The owner of Natwest, now 70 per cent controlled by the nation's taxpayers, is feeling pressure from the Treasury to hit lending targets and is thus pulling out the stops to attract more small business banking customers, we hear.

And the first step? A new hotline – staffed by senior bankers with experience of previous recessions – to cater for small firms having problems getting their hands on credit at the moment.

You don't have to be an RBS customer to avail of the free service, which is described as being part of the bank's aim to be "transparent and innovative" in its support for UK firms.

Graham Galloway, managing director of the bank's Scottish business and commercial arms, said RBS is making "ambitious commitments" to respond to and handle all calls and emails "in clearly defined timescales with dedicated managers".

"Sometimes a fresh pair of eyes looking at a case can produce an alternative solution. We are currently approving 85 per cent of loan applications and we're always looking to improve," he added.

RBS chief Stephen Hester has apparently written to all MPs urging them to direct firms to the service, which runs from 8am-8pm on weekdays, on 0800 092 3087.

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Entrepreneurs and small business owners have been finding it tricky raising finance lately, that's no secret.

But the East of England Development Agency (EEDA) is putting its money where its mouth is and shelling out loans of up to £200,000 to give such individuals a foot up the business ladder.

Even if you've already been refused cash by your bank, you're still eligible – in fact, if that's the case, you've ticked the box you need to qualify for the Small Loans for Business programme.

The help for businesses across Essex, Cambridgeshire, Norfolk, Suffolk, Bedfordshire and Hertfordshire comes after the Federation for Small Businesses criticised UK banks' "monopoly of power" over small firms seeking finance.

It called for a bigger variety of affordable loans and overdrafts, particularly at a local level.

"Business owners often think they have nowhere to turn if they are refused credit from the banks, but that's not true," says Richard Ellis, chair of EEDA.

"Here at EEDA, we are offering loans with flexible repayment terms to businesses with viable business plans – businesses which may just be seen as too risky for banks to support in the current climate."

While the Small Loans for Business initiative offers between £500 and £50,000 to regional enterprises whose funding applications have been refused by banks, EEDA's Regional Growth Loans can provide up to £200,000 for small to medium-sized firms which have "a real potential for long-term growth" and a workable business proposition.

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Here are the advantages and disadvantages of the typical finance providers. This guide will help you to decide which options will suit you best when preparing to buy a business.
There are three types of finance for business buyers to choose from: loans, share capital and grants.

What follows is a summary of the core types of finance providers that business buyers use.

Banks – appropriate for small business buyers who do not expect their business to grow quickly.

Banks are cautious in their lending so you need to have prepared a convincing and thorough business plan. A finance broker can help you with this.

Advantages
* Familiarity and easy access.
* Flexibility: you can personalise a loan where your first few payments are smaller than later payments.
* You won’t have to give up a share of your business.
* Long established and regulated rigorously by the Financial Services Authority (FSA).
* Debt finance provided by banks is much more accessible to small businesses unlikely to grow rapidly, or at all.
* Internet banking means you can keep an eye on your accounts 24 hours a day.
* Customer service – one-to-one advice and assistance at your bank from a dedicated relationship manager. Most banks also offer telephone banking, sometimes even 24-hours a day.

Disadvantages
* You may need additional guarantees, which can affect your credit rating.
* People that need the money the most are often turned down.
* You will owe the bank interest as well as the money you originally borrow.

Government loan – appropriate for business buyers with no assets

The Government set up the Small Firms Loan Guarantee Scheme, which is administrated by the Small Business Service (SBS), in order to assist entrepreneurs with no assets to use as security for a loan. The loan can be repaid over a period of between two and 10 years.

Advantage – Perfect for when you don’t have any assets to use as security.

Disadvantage – There is an additional fee of 2%, which is to be paid yearly to the Government.

Venture Capital Funds – appropriate for business ventures declined by banks due to high degree of risk

Venture capital funds (VCs) are generous if they think they will get big returns in a short space of time. They only offer share capital; so offer finance in return for a share in your business.

Advantages – A source of large amounts of capital.
No repayments to consider.

Disadvantages – Required to sacrifice a large part of your company.
Will not be viable for the majority of small and medium businesses.

Business Angels – appropriate for new business buyers with few contacts that are prepared to give back high returns.

Business angels, who are wealthy individuals, also expect high returns and will take on high levels of risk. Unlike VCs, they invest at levels, between £10k and £250k that are aligned with small businesses’ needs.

They are likely to have experience in running businesses and good local knowledge because they usually focus their investment in a particular region. Therefore they are good candidates for great mentors for an inexperienced entrepreneur with few contacts.

Advantages
* Happy to invest levels of capital suitable for small businesses.
* You can often secure investment relatively quickly.
* Can offer advise due to their first-hand experience of running a business.
* Often have good local knowledge.

Disadvantages
* Expect high levels of return on their investment, so not suitable for businesses expecting low levels of growth.
* Infrequent investors.

I will post more summaries of finance providers next week, as there are quite a few!

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In the uncertainty of today’s global economic climate, small and medium-sized companies may be concerned about the implications for their business. With some careful planning, a greater focus on cash flow, and more efficient communication with the bank, any business can avoid the possible negative effects of the credit crunch.

The following points from ACCA, and Robert Moore at Bizsale.co.uk, offers advise for small and medium business owners to conduct financial affairs with a more sensible approach.

1. Strong financial planning is very important – don’t allow difficult business decisions to put you off making them.
2. Explore your credit options with other UK banks.
3. Get into the habit of being in communication with your bank, and perhaps with your accountant if necessary.
4. Go over your bank charges. Could you switch accounts or find a better deal with a different bank? Could your current bank give you any special deals as a loyal customer?
5. Keep an eye on rolling-over banking facilities, and look out for hidden charges and incorporate those into financial planning if necessary.

6. Consider your direct debit arrangements – for the business and for your personal finances.
7. Do what you can to clear credit card debt. But if you use credit cards, try to pay off balances before you are charged.
8. If you are due to make payments, inform your creditors of the reason why you can’t do so yet and when they can expect a payment.
9. Pay particular attention to cash flow forecasts and to monitoring cash flow. Make sure that management accounts are up to date, and that all key financial reconciliations are dealt with.
10. Tighten your reins on credit control and cash collection procedures.

11. Consider the timing of future orders and your forward order book.
12. Consider carefully current and future customer’s ability to pay. Don’t depend on credit ratings. Maybe try and get references from people who have dealt with them before.
13. It is important to pay special attention to upcoming investments and major capital expenditure. Can they be rescheduled?
14. For those businesses which import/export, think about whether foreign exchange hedging could be relevant to your company.
15. For April year-end – be clear about Stock and Work in Progress valuations – get early audit agreement to valuation principles. Do the same for all ‘fair value’ items on your balance sheet.

16. Consider your staff requirements. Could you look at offering your current staff more paid overtime, instead of taking on new staff.
17. You could consider temporary or fixed term assignments but first weigh up the pros and cons against full time recruitment.
18. Ensure that awarding pay rises and setting up staff incentive schemes relate to profitability and cash generation as well as growth.
19. Evaluate your personal financial drawings from the business such as cars, home improvements or holidays. Are they appropriate in terms of current and future profitability and cash generation?
20. Don’t embark on new business ventures without fully understanding the risks. As such, make sure you can manage or absorb the loss if things don’t turn out quite as planned. However, it is often during difficult times that new ventures can reap large rewards, as there is less competition and hasher economic conditions can help discipline the business to achieve profitability.

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Seeking the right company to purchase is a very competitive process. Often, money is the most critical weapon a business buyer has to differentiate themselves from all the other business buyers, who have found the same business that is on the market.

When you find a business that ticks all the right boxes but initially exceeds your budget, you will have to be creative and resourceful before you can commit to buying.

Here are some ideas of how you can get the necessary funds for your business purchase:

The buyer’s personal funds:

1. Cash savings
2. A private loan from a friend or family member
3. Advances from personal credit cards
4. Obtain a bank loan secured with high value personal assets, such as your home or car(s)

Other funding sources:

1. Bank loan to the business
2. Asset loan to the business
3. Loan from current supplier(s)
4. Finance or sell off all existing excess stock owned by the company
5. Sell high value assets and lease them back or finance them
6. Sell high value equipment outright and time share or borrow other like equipment
7. Sell the car park land or your business’ allocated spaces
8. Sell or sublet the part of the building (if owned) and get advance payments

Negotiate outstanding business purchase balance arrangements:

1. Defer the initial payment for as long as you can
2. Assume more or other liabilities not originally in the purchase contract
3. Let the seller retain all receivables
4. Negotiate extended payment terms with your new suppliers

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Earlier on this year Chris posted on the blog heralding capital gains tax concessions for small business owners, due to begin in the new tax year. As April swiftly approaches, here are some details on the initiatives’ benefits to small business owners.

As well as providing tax relief, Alistair Darling has also promised to improve access to finance for small businesses.

The Small Firms Loan Guarantee is due to be increased by £60m this year and eligibility expanded. Alistair Darling has also added £30m to the available Enterprise Capital Funds.

The Treasury is considering giving 30 per cent of government contracts to small and medium-sized companies over the next five years, as well as dropping restrictions on factoring and invoice discounting in public sector contracts.

Tax relief on the Enterprise Investment Scheme and the Enterprise Management Incentive Scheme will increase by £100k and £20k respectively.

The Chancellor is also committed to encouraging more female entrepreneurs.

The Women’s Enterprise Task Force have welcomed a £12.5m capital fund for investment in women-led businesses which is to be included in the Budget this year. The plan also indicates a nationwide media campaign and regional pilots of business centres to support female entrepreneurs.

So overall, it looks as though 2008 will be a better year for small business owners with respect to their tax position and new allowances. This new focus on assisting small businesses will not, however, necessarily make taxation any easier. Benefits to small business owners will depend on how the Treasury’s promises are put into practice.

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