Starting a new business is never easy, especially in today’s topsy-turvy financial climate. According to the latest figures, roughly 80% of SME’s fail within the first five years and almost 90% don’t reach the 10 year mark. Yet, despite the terrible figures, astonishingly small and medium sized businesses account for nearly 60% of the UK’s job market and equate to almost half of the country’s economic output.
With so much of Britain’s economy relying on small to medium sized businesses, it’s no wonder that the government has become increasingly concerned with private sector growth. In order to help stabilise and grow Britain’s economy, the government last month announced that the UK’s largest banks have agreed to provide £190bn to businesses in 2011, as part of the coalition’s new Project Merlin scheme.
Under the new system £76bn will be made available to firms in the form of small business loans; the rest of the fund will go to medium and large sized firms, as well as an additional £200m for the Big Society Bank to help finance community projects.
As part of the accord the 4 major UK banks – Barclays, HSBS, LBG and RBS, as well as Santander, have agreed to;
1.1.1 Support a network of mentors from the banks, attached to existing mentoring organisations, to deliver a free finance service to small and medium sized businesses across the UK;
1.1.2 Improve service levels to micro enterprises through a new Lending Code;
1.1.3 Publish lending principles which clearly set out the minimum standards for medium-sized and larger businesses;
1.1.4 Establish transparent appeals processes for when loan applications are declined, with processes independently monitored by a senior independent reviewer, who will publish the results of their review;
1.1.5 Initiate a pre re-financing dialogue 12 months’ ahead of any term loan coming to an end;
The government hopes that the new agreement will speed up the lending process for small businesses, as well as encouraging banks to take more of an active role in helping to build and maintain successful SME’s.
For more information on the government’s Project Merlin accord see the following PDF from the HM Treasury website.