EUKN - European Urban Knowledge Network - Improving SMEs access to finance

Improving SMEs access to finance – London, GB

Introduction

The London Objective 2 Access to Finance Programme tackles the barriers faced by small and medium size enterprises (SMEs) in accessing finance.

Problem

The proposal for the Programme was developed out of research into why small to medium sized businesses often fail to obtain appropriate funding for their business.

The research, which was conducted during the development of the Programme, showed that the London Objective 2 area has the same SME finance problems as London as a whole but the intensity of these problems is greater. However, access to finance was identified as one of the key constraints to business development in the London Objective 2 area.

Description

Historically, public policy has tended to focus on the unavailability of appropriate finance in addressing the finance problem of SMEs. However, the London Objective 2 Access to Finance Programme adopted a more innovative, balanced approach targeted at addressing both demand–side and supply-side issues that prevent businesses accessing finance.

The Access to Finance programme consist of a portfolio of five projects (including one funded by European Social Fund) which all complement each other. The Access to Finance Readiness project aims to:

increase the ability of SME to access finance by improving their financial proportions; and
increase the awareness of the type of funding options available to SMEs and the requirements of finance providers.

The other four projects are geared towards increasing the supply of debt and equity financing.

Approach

The SMEs’ access to finance is improved by:

providing information and advice on the different types and sources of financing available to SMEs and the requirements of finance providers;
providing a subsidy to help SMEs obtain the professional advice they require to get them “finance ready”;
increasing the supply of debt and equity financing to bridge the gaps identified by the audit study.

Results

Since its launch in 2003 the project has been a huge success in bringing tangible benefits to SMEs in the Objective 2 area and providing a model for public policy in this difficult aspect of economic development. To date
the projects have achieve excellent results, some of which are listed below:

363 SMEs have been assisted to successfully raise 31.5 million euros – this represents 4,28 euros raised for every euro of ERDF committed to this project. The project has, in fact, supported 1386 businesses but
some are yet to complete the funding application process.
Of the 363 SMEs, 258 were new businesses raising 13.8 million euros and 105 were established businesses raising 17.7 million euros.
220 of the enterprises which raised finance were black and minority ethnic (BME) managed/owned businesses and they raised 14.2 million euros.
Also, 107 of the enterprises which raised finance were women managed/owned businesses and they raised 5.0 million euros.

Resources used

Total funding: 42.3 million euros

Structural Fund (ERDF) co-financing: 17.8 million euros

National public co-financing: 11 million euros

National private co-financing: 13.5 million euros

EU involvement

This practice was presented at the Fourth Best Practice Conference New Horizons in Graz, Austria on 15 November 2006. The conference aimed at promoting exchange of experience and dissemination of best practice between authorities involved in the implementation on EU Structural Funds Programmes in Europe. It was destined to contribute to improving quality of implementation of Structural Funds on the basis of project presentations and visits.

Contact info

Government Office for London
Kenroy Reid (Access to Finance Programme Manager)

Project start date

//2003

Links

Visit the Government Office for London website Visit the GRAZ Best Practice Conference website

Download the 'Improving SMEs access to finance – London, GB' Report (PDF, Eng, 68 KB)

Document type

case

Themes

Urban Policy > Economy knowledge & employment > Urban economy

Keywords

Business support