Local Growth Grants for Business Investment UK – Not All Good News

Under the new UK Coalition Government mechanism for securing business finance and grant funding are rapidly changing and it is not all good news. Read more to find out about changes announced in the recent government white paper Local Growth, the future of Enterprise Capital Funds and the new Business Growth Fund.

The recent UK Government white paper ‘Local Growth' announced that Grants for Business Investment will not continue after the Regional Develop Agencies (RDAs) are abolished and South East England Development Agency (SEEDA), for one, has decided that it will not be in a position to provide any new grants under this Scheme.

Grants for Research & Development (R&D) will be adopted by the Technology Strategy Board next year although details and timing are still to be clarified. Budget constraints at SEEDA are currently preventing new awards being made so we as business advisors are not encouraging new applications for the time being. Tax Credits are administered by HMRC and they are still available to all companies engaged in R&D Projects. Existing approved projects will continue as planned and be able to claim their grants.

The Business Innovation and Skills Department has also issued a Paper following their consultation re Funding of Small and Medium Enterprises (SMEs).

The FOCUS will be on getting SMEs Investor Ready!

Enterprise Capital Funds will continue with 300m pounds of investment targeted at the SME high growth equity gap for early stage investment.

A new Business Growth Fund with 1.5 Bn pounds is established with the banks to target the upper end of the SME market in the 2m to 10million pound bracket for high growth companies with 10-100m pounds turnover per annum. Although this equity fund they seek to gain lending leverage of 2 pounds for every 1 pound in equity.

Supply Chain Finance (SCF) will be addressed by Government working with large businesses to increase SCF.

Exporters will also be helped with the Export Guarantee Scheme being beefed up to provide bond support.

The tax Regime will be addressed as soon as the Coalition Government feels it can to give UK businesses the most competitive tax regime in the G20! Hoorah!

The Grants regime of the recent past is no more and a new body, the 'Business Growth fund' will be set up to invest the banks own money, up to 1.5bn pounds equity to assist viable SMEs to grow and contribute more to the economy. Additional funds will be sought from European Investment Funds to augment the bank funds. (This is a model which the Commonwealth Development Corporation has operated successfully since 1994 without taxpayer addition) The Enterprise Finance Guarantee Scheme will continue to operate until 2014/5 but with the banks under pressure to put up barriers in relation to the degree of guarantee they seek from SMEs for these funds.

So a great deal of change forecast and it will take time to bed down, but it does seem to me that in this mélange of actions we have a range of options far greater than we have had before to bring service and finance closer to the SMEs.

The multi layered bureaucracy that was there before seems to be getting the scythe applied to it and more of the monies identified for SMEs will actually be delivered to them. The last government was achieving a delivery of 1 in 3 pounds of public spend to SMEs, so an engineering efficiency of less than 33%.

Exciting and changeable times.

This article was researched and edited by my colleague, Bob Watson, a business advisor with considerable experience and knowledge of securing finance and grants for SMEs. Bob can deliver advice and R&D project management templates that simplify the claims process.

Contact Bob Watson bobwatson@iib.ws www.support2business.co.uk

BusinessTalent is run by Linda a management consultant and business advisor, speciaist in business planning and public sector tenders, based in London, UK - www.businesstalent.co.uk