Member Article

It is a long held truth that businesses require more growth finance in times of economic recovery. Given the state of the economy on both a national and local level, now is the time to help Midlands based business owners and entrepreneurs.

Recent figures from the British Bankers’ Association show that small businesses experienced a reduction in net lending in the first quarter this year, with repayments of existing debt exceeding new lending by £300 million.  Given this reduction in lending, the launch of a new mezzanine debt fund in Birmingham and the surrounding area marks a welcome funding boost for local SMEs and follows similar local initiatives such as the Foresight Nottingham Fund.

The Finance Birmingham run fund marks an interesting combination of public and private finance with the West Midlands local authority pension fund a key partner. Flexible funding of up to £2 million is available to SMEs based in the West Midlands (regardless of sector) that will create or safeguard jobs as a result of the funding.

For local business owners and entrepreneurs this would seem to represent an excellent alternative source of funding. True loans are likely to be more expensive than conventional bank debt but at this level senior debt from the high street lenders remains exceptionally rare.  Working capital funders continue to show a strong appetite to lend and will have a real part to play in shaping the right funding package. However, reliance on working capital finance exclusively to fund growth is a risky strategy.

As ever, getting the optimal funding package to meet the needs of a business and its owners on the right financial terms requires an excellent business plan and a clear strategy. For local business owners the options for growth have just grown considerably wider.