The Government has established a Business Finance Council to help small businesses access funding once the UK has left the European Union.

Business secretary Andrea Leadsom will co-chair the finance council with economic secretary John Glen, which will be made up of representatives from high-street banks and alternative lenders.

The council will identify and help overcome any barriers faced by small and medium-sized businesses in securing the finance they need, particularly working capital and investment.

Leadsom said: “Our new Business Finance Council will bring together key players, ensuring that finance continues to flow to our brilliant businesses so they can do just that.”

Glen added: “It’s vital that businesses engage with their lenders ahead of Brexit and the new Business Finance Council will ensure government, banks and other lenders work together to help SMEs access the finance they need.”

Michael Gove, the minister in charge of no-deal preparations and small business minister Kelly Tolhurst were also present at the meeting on Thursday.

Banks and alternative lenders summoned to the Cabinet Office included Barclays, Bibby Financial Services, British Business Bank, Close Brothers, CYBG/Virgin Money, Funding Circle, HSBC, Lloyds, Metro Bank, RBS, Santander, Secure Trust Bank, Shawbrook, TSB and UK Finance.

“The mood music was good and there was a willingness to collaborate,” one participant told Small Business.

Business Finance Council

However, the Federation of Small Businesses, said the small businesses themselves should be represented on the Business Finance Council.

Mike Cherry, chairman of the Federation of Small Businesses, told the Daily Telegraph that while the council was “undoubtedly needed”, it would require “direct input from firms on the ground” to understand how best to support small and medium-size businesses (SMEs) through a possible no-deal Brexit.

“If we do suffer from a downturn in the months ahead – as a number of forecasters predict – we need reassurances that the banks are not going to turn off the taps for small firms as they did during the financial crash,” he said.

“We emerged from the crash with thousands of small business banking horror stories. We can’t have those same mistakes repeated,” Cherry added.

Guaranteeing loans

The business secretary reminded lenders of the existing guarantee schemes available to them through the Government-owned British Business Bank and urged them to make the most of this support.

There is currently approximately £300m of further headroom available to lenders this financial year through the British Business Bank’s Enterprise Finance Guarantee (EFG).

The Enterprise Finance Guarantee provides lenders with a Government-backed guarantee for up to 75pc of the outstanding balance of eligible facilities, potentially enabling a “no” credit decision from a lender to become a “yes”. It supports facilities of between £1,000 and £1.2m to smaller businesses that are viable but unable to obtain finance from their lender due to having inadequate security to meet the lender’s normal credit requirements.

In the longer term, there is also approximately £1bn of guarantee headroom currently available and uncommitted under the BBB’s Enable Guarantee programme.Enable Guarantees support lenders such as banks and non-bank financial institutions unlock more lending to smaller businesses. Participating banks are incentivised by a government-backed portfolio guarantee to cover a variable portion of a designated lending bank’s net credit losses. British Business Bank has committed guarantees for portfolios of over £800 million.

“The main takeaway from the meeting was reminding banks that there is this facility available and it has capacity,” said one insider.

Leadsom added: “Lenders must empower their SME customers to seize the huge variety of opportunities that lie ahead as we leave the EU on 31 October.
“Our financial system is strong and banks have the capacity to lend. I would urge lenders to take advantage of the support on offer from our fantastic British Business Bank.”

Glen added: “SMEs are crucial to the economy and I want to make sure they are fully prepared as we get ready to leave the EU.

“As the City Minister, I will be working closely with lenders to make sure businesses can seize the opportunities of Brexit and continue creating jobs, growth and prosperity for the country.”

Further reading

KPMG urges SMEs to speak to banks before shock of no-deal Brexit