Credit conditions for thousands of small business are getting worse not better, according to the Bank of England, which has pumped £125bn into the economy to mitigate the effects of recession.

But its quantitative easing programme has done little to stimulate lending to firms, which dropped £1.1bn in four weeks to £7.9bn a month.

Firms have borrowed £12.6bn since March, according to the BoE’s own figures.

Loan facilities worth a total of £5.8bn were also withdrawn from companies last month – the same level seen in April.
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Small businesses facing the squeeze are being helped to ride out the recession with the help of interest free loans aimed at slashing their energy consumption

Jeff Greenall’s family-run Cavan Bakery in Hampton Hill, south-west London, has cut its energy bills by 75% thanks to a loan of £31,000 from the Carbon Trust.

Greenall used the money to replace his old oven with one which runs on gas-powered steam. He said: ‘The changes we have made have had a real impact.’

The Carbon Trust’s coffers will this week be boosted by an extra £100m of government funding.

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Fast food is doing well out of the recession, as people abandon expensive dining in favour of cheaper options

If you want to set up in the fastfood or coffee shop business, getting in with a franchise is certainly easier than setting up alone.

Many well-known High Street names are franchises, so you start with the benefit of a known brand. Location is vital for success, so look for franchisors who help you to choose a good site.

‘We retain a property agent who is continually looking for suitable sites in towns and cities, where there is good footfall,’ says Robin Stenhouse of Baguette Express, the franchised fast-food chain that is looking for more franchisees with £75,000 to £115,000 to invest.

‘We can sometimes obtain rental discounts and rent-free periods,’ says Mr Stenhouse.

You do not need experience of the food industry for most fast-food franchises, but you will need good commercial skills.

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The NatWest Everywoman awards celebrate female entrepreneurs, in particular those who have overcome personal and financial difficulties. So what has winning meant to previous contestants?

Former beauty salon owner Sandra McClumpha, from Bothwell, near Glasgow, won the Athena award in 2006. Sandra’s business began after she came across Fake Bake, a successful American self-tanning lotion. Realising its potential, Sandra bought the UK licence to the brand in 2001.

At the time, Sandra, now 40, was a single mother of Louis, now 8, and with another baby on the way, Natalia, now 6. She sold her beauty salon and car to fund the business, with the result that Fake Bake is now available in 5,000 beauty salons throughout the UK and in stores such as Harrods.

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With bank finance still hard to come by, smaller businesses have been flocking to Dragons’ Den-style ‘business angels’

But the increased demand has led to a shortage of investors, say experts.

The British Business Angels Association has seen a 40% to 50% increase in demand for finance from small firms since the banking crisis reached its peak last autumn.

Pressure has not eased. Bank lending to businesses was £1.1bn lower in May than in April, latest figures show.

But with business angels – usually successful entrepreneurs – having to spend more time on their own businesses during the recession, angel networks are becoming increasingly stretched.

The BBAA has launched a Government-backed series of roadshows, workshops and awareness-raising campaigns to encourage more people to think about becoming a business angel.

‘We are trying to get more people who have been in business and have lots of experience to consider this as something useful to do and a good way of investing their money,’ says Jenny Tooth, BBAA business development director.

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With school-leavers and graduates facing the toughest jobs market for nearly 20 years this summer, small firms are being urged to help them

Barely a fifth of employers plan to hire post-GCSE school leavers over the next three months, while just a third intend to recruit A-level students, according to a survey by the Chartered Institute of Personnel and Development and accountant KPMG. And a third of bosses have already cut back sharply on graduate hiring.

Though many small firms are struggling for survival and may be unable to hire staff directly, they can do more to encourage school-leavers to see small business as a viable career option, suggests business directory company Thomson Local.

It has launched a ‘build a business’ scheme to get schoolchildren to think about how they might set up a business that would aid their community, with the top 50 proposals receiving a £100 bursary to help make it a reality.

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With more than 11m children in the UK, businesses offering childcare and children’s activities can be lucrative

Many of them are franchises, and they particularly appeal to parents. Nigel Toplis, who runs the children’s activity franchise ComputerXplorers, says: ‘Franchises which are childrenbased often offer the opportunity to work from home. So you can fit the job around your family, and operational costs are lower than franchises requiring premises.’

ComputerXplorers franchisees run classes in local schools and venues offering Information and Communication Technology (ICT) in which children improve their academic and computer skills through subjects such as rocketeering, film-making, robotics, crime scene investigation and clay animation.

You do not need an ICT or teaching background, as the £24,500 franchise fee includes training, technology and lesson plans.

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Owners are facing up to a growing threat of fraud and theft committed by their own staff

Research by the accountancy group, BDO Stoy Hayward, shows that reported fraud for 2008 hit £1.19bn, up 14% on the year before. Alongside larger corporate frauds, petty theft within businesses is rising as some staff feel the recession bite.

According to Cifas, the private fraud prevention service, common forms of fraud include the misappropriation of funds, stealing cheques, inflating expenses claims and forging signatures.

Fraud that escaped notice in boom times also becomes apparent in a downturn as the company’s books are scrutinised more closely.

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The culture of late payment has become an increasing burden for small businesses, with outstanding payments totalling more than £10 billion, an increase of £1.7bn on a year ago

On a typical day, small firms in England and Wales are £2,440 out of pocket on average because customers have failed to settle their bills within the standard 30-day invoicing period.

According to the annual Barclays Late Payments report, a 20% rise in late payments has also forced firms to write off nearly £5 billion in the past 12 months, equivalent to £1,133 for every small and medium-sized business.

With Government figures showing that company insolvencies have soared by nearly 60%, experts are urging firms to ensure they have proper debt collection procedures to help protect themselves from going under.

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Finally out of the gloom comes some potentially good news for SME’s. It has been announced that as of the 14th of January 2009 until March 2010 there is going to be an new initiative called the EFG Scheme which will assist businesses with a turn over of up to £25 million with a loan of up to £1 million, 75% will be guaranteed by the Government and 25% will be unsecured and at the banks’ risk. This will of course be based on the applicants meeting certain criteria and for companies that are creditworthy.

There are some very interesting changes to this scheme compared to the Small Firms Loan Guarantee Scheme as the SFLG could not be used to cover debt; many of our clients seek a way of consolidating various debt lines that they have and this was impossible to do with the old scheme. At first sight the sector industries that are ineligible seem to be greatly scaled down, we will of course have to wait to get final information.

What is EFG Scheme?
This is the Government’s new £1bn Enterprise Finance Guarantee (EFG) Scheme will support up to £1.3bn of new lending by banks to eligible SME’s with working capital or investment needs.

Which companies will benefit from the scheme?

The EFG Scheme is going to be open to businesses with an annual turnover of up to £25m, seeking loans of £1,000 to £1m, which can be repaid over a period of 10 years.

Most businesses in most sectors will be eligible for the scheme. However, state aid rules exclude businesses in the agriculture, coal and steel sectors.

What sorts of lending will this cover?

The guarantee can be used to support refinance existing loans, new loans or to convert part or all of an existing overdraft into a loan to release capacity to meet working capital needs.

How much of the loan is the Government going to guarantee?

The Government will guarantee 75 per cent of the loan.

How long will the scheme run for?

EFG will be available from Wednesday 14 January 2009 and will be available until March 2010.

Who are the participating lenders?

Barclays
Clydesdale / Yorkshire Bank
HBOS
HSBC
Lloyds TSB
RBS/Natwest
Northern Bank

Other lenders will be come eligible as they apply.

Contact Strategy Corporate Finance Today to see how we can help you with your application – call 0845 838 0936 or email