Federation of Small Businesses says the Government proposals will help.

The latest backing for the Government £350 million assistance plan has come from the Federation of Small Businesses (FSB).

The FSB said the new Government proposals were, “going along the right lines.”

The FSB has campaigned for more support to help small businesses improve their cashflow and said it is pleased to see pledges by ministers to extend Government guarantees to pay invoices within ten days to the wider public sector as well as commitments to employee training and free business health checks.

Commenting on proposals for all councils, public sector bodies and NHS trusts to pay small firms within 10 days, FSB National Chairman John Wright said:

"These initiatives are a welcome breakthrough and set an example to the private sector by paying as early as possible. We have already written to most local authorities urging them to copy the example of Brentwood Borough Council which thanks to FSB lobbying, has committed to paying on 20 days. This new proposal to move everyone to 10 days should help small businesses with their cash flow.”

Responding to the proposals by Skills Secretary John Denham to prioritise training for small businesses in England under the Train to Gain scheme, Wright said:

"Small firms need all the help they can get when it comes to training their staff. It is crucial that training is appropriate and affordable for the smaller employer.

“Small businesses are often impeded by lengthy administration and the costs of providing training so must be made aware of support available. We welcome these measures which should lead to greater uptake of the Government's 'train to gain' scheme."

Difficulties still lie ahead

This morning SME web noted that SMEs were still in potential trouble when it came to securing what they need the most - access to finance.

SMEs have enjoyed an increased presence in the limelight of part politics this Autumn.

Richard Northedge of Director of Finance Online says, "for small firms facing falling sales and margins that are turning negative, training and investment are luxuries that are already on ice: their short-term objective is survival."

The cashflow benefits of prompt payment are important for small firms but refinancing old loans and access to increased working capital even more so.

Calls have been made from within industry for more financial assistance to be made by the Government. This morning Piers Cracknell, Commercial Director of currency specialist Moneycorp summed it up when he said:
 
“While small and medium-sized businesses will welcome the Government’s aid package, £350 million is a paltry sum compared to the £500 billion that was used to bail out the banks. Huge challenges lie in store for SMEs, particularly the 30 per cent that engage in cross-border trade. The pound continues to fall heavily against both the dollar and euro which means costs are soaring at the worst possible time."

The banking challenge for SMEs

Northedge has hinted that it is unlikely things will get easier for small businesses when it comes to seeking finance: 

"As the main shareholder in three of the big banks, the government should be not be encouraging imprudent lending. It is quite legitimate that banks now refuse loans they would have provided – or did provide - last year, or that they demand higher interest rates or greater collateral.

In practice banks may advertise credit availability to keep the government happy, but in practice it will be on terms that companies will decline. Short of the state offering guarantees or subsidies, the banks couldn’t and shouldn’t do anything else.

It is welcome that ministers appreciate that small firms are a key driver of the economy, but many operate on models that are unviable in a recession. Banks cannot be forced to make bad loans."

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