MSBs in the North West are struggling to secure long-term financing » SMEInsider

MSBs in the North West are struggling to secure long-term financing

Medium-sized businesses in the North West are struggling to secure long-term financing, according to a study by accountancy firm BDO.

The group says that although bank lending is more available and Peer-to-Peer (P2P) lending has seen huge growth in recent years, these funding options only cover short-term requirements, thus leaving a big gap for companies looking to raise finances for longer periods.

The report, a joint effort between BDO and employers’ organisation CBI, says that over half of MSBs are finding it difficult to secure loans for periods longer than five years.

Despite North Western mid-market companies representing just 2 per cent of companies, they still manage to generate 28 per cent of revenues and make up a quarter (24 per cent) of the regional workforce.

The Merseyside area has actually seen a 6.7 per cent increase in its total number of small businesses. Greater Manchester leads the North West region in terms of SMEs with 78,665 businesses.

Ruth Percival, mergers and acquisitions partner at BDO in the North West, said: “MSBs lack diversity in long-term funding sources, despite being fundamental to creating a balanced and sustainable economy.”

BDO and CBI are both issuing recommendations for the ways the British Government can encourage long-term debt.

They say offering tax incentives and equity investments can help companies grow over a longer period of time.

“A key part of unlocking their enormous potential is for the Government to fix the funding ladder, filling in the gaps in the supply of long-term finance that the North West’s brightest growing firms need to succeed,” said Damian Waters, CBI regional director in the North West.

Both companies say the tax incentives should be offered under newly-created Long Term Lending Trusts to investors that are able to provide long-term debt that would last for a minimum of half a decade. It would be similar to the Venture Capital Trusts scheme.