Small business financing remains a hot topic. The Obama administration passed a small business bill recently, while policymakers in the UK, concerned by lending, held wide consultations on lending to small business.
The banks, who have already seen heavy scrutiny on bonuses and expenditure, have also been criticised for the drop in lending.
The depth of the problem, and the proposed solutions vary depending on who has the floor:
- more stringent bank lending criteria
- widening loan margins
- reduced small business capital outlay (and thus, need for additional working capital
- fund raising process too time consuming for small firms;
- increased borrower risk (worsening credit quality);
- lack of knowledge (and education) of financing alternatives;
- regulation mismatch;
- contracted lending commensurate with a recession;
- insufficient spreading of the load within the financial supply chain; and
- tightening of wholesale funding markets.
The banking community in the UK, as part of its business finance taskforce, recently released its 17 point plan. There are some positive measures contained in the document, which if implemented well, could generate results.
Question, is whether the 17 points can be tackled sufficiently, and if so, will they be enough? Do we need something else? Regardless of what the magic number is, there are steps/recommendations that require a number of stakeholders to come together to make it happen. As with anything involving different interests, it will end up being a series of small steps. Hopefully in concert.