12/11/2017

Merlin leaves small businesses short of funds

With banks missing their Project Merlin targets, business leaders have criticised the government’s efforts to open lines of credit to SMEs.

Small businesses, which are vital to the health of the UK economy, are faced with ongoing problems in securing capital after the end of the Project Merlin initiative.

Merlin shortfall

One year on, official figures show that the banks have failed to deliver on their collective target of providing £76 billion in loans to small companies. Four of the UK’s largest banks met their commitments, with Barclays beating its target by 13 percent – lending some £15 billion. However, it was taxpayer-owned giant RBS that missed the mark, blaming the Eurozone crisis for the results that saw Merlin fall short overall by over £1 billion.

Business leaders have stated their fears that problems in accessing loans will stifle the activity of SMEs. Nick Green, founder of digital printing company Printed.com, has urged the government to do all it can to prompt part-nationalised banks to help all-important small businesses. ‘At Printed.com we have got a very big focus on the SME market and I think that over the next few years that market is going to be very important for the UK economy. As owners of the banks, the Government needs to push banks harder to open up lending and that is what they have to do.’

New initiatives

However, Mr Green recognised that the reluctance of the banks to take on yet more risky loans could dissuade them from providing assistance to smaller companies until the economy was already stronger – a Catch-22 situation. ‘At the end of the day, banks are in the business of lending and we all know that the taxpayer has a high percentage ownership of UK banks. More funding should be getting through to SMEs. I am just a little nervous it could take a while.’

Although bank lending is one major source of finance to SMEs, it is not the only one. CBI director general John Cridland encouraged the government to open up other avenues of funding. ‘While banks will remain an important part of the funding landscape, we need to give our firms access to new sources of funding, such as by opening UK bond markets to medium-sized businesses.’ A series of new government initiatives will provide loans and guarantees worth £21 billion to small and medium-sized businesses in the coming year, though the Merlin initiative itself will not be repeated.

Funding new businesses

Whilst many businesses report difficulties in securing funds, the lack of jobs available during the recession has prompted many entrepreneurs to start their own companies instead. These people typically find their start-up capital in a number of ways other than bank loans:

  • Savings
  • Loans from friends and family
  • Credit cards, often making use of the 30-day interest-free period
  • Angel investors (who will usually provide business advice too)
  • Taking money up-front from customers
The good news is that businesses strong enough to survive a downturn will likely thrive in better times, and those that start in a recession are often more resilient than those that have never been tested in this climate.

This article was supplied by printed.com, a supplier of quality leaflet printing and an accredited member of the World Land Trust.