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Do we need the RDAs?
The Taxpayers' Alliance would like the regional development agencies abolished. M Institute co-founder Jyoti Banerjee studies their report - he likes their data but disagrees with their recommendation.
Understanding M
Mid-size enterprises are the powerhouse of the UK economy.
Despite their sterling performance, mid-size enterprises are nearly invisible.
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New mezzanine finance in government strategy
The new Enterprise Strategy paper from the Department of Business, Enterprise and Regulatory Reform (BERR), published alongside the Budget 2008, announces a number of finance initiatives that are extremely relevant to medium enterprises. For the first time, the government acknowledges the need for mezzanine finance vehicles of the sort that M Institute has been campaigning for on behalf of medium enterprises.
The newly created Capital for Enterprise organisation has taken responsibility for managing £350m of existing government venture capital and loan activity, starting April 1, 2008. While these are aimed at high growth early stage investments, there are two further initiatives that look interesting. Firstly, Capital for Enterprise will be seeking to commit around £50m of government capital per year for the next three years in third-round funding of Enterprise Capital Funds (ECF). Possibly more important for medium enterprises is the task that Capital for Enterprise has to work with the major banks and fund managers to stimulate the delivery of mezzanine finance products. The government has committed an additional £30m through the ECF programme over the next three years to support this task.
The Enterprise Strategy paper states that one in seven growth aspirant businesses with difficulties in obtaining finance attributed them to insufficient collateral. Another problem the paper identifies is that those companies seeking between £250,000 and £2 million have particular problems raising equity finance. What the paper does not say, but M Institute has pointed to repeatedly, is that many medium enterprises don’t want equity finance but the preferred loan alternatives are usually not available to them due to problems with collateral.
£30m of new mezzanine finance will not solve the finance problems of medium enterprises but, if it is well applied, should help some medium enterprises find the funding they need to achieve their growth ambitions.
