In recent years the news has been filled with negative stories of how the local high street is failing, small businesses getting trampled on by conglomerates and pay day lenders ruling the roost. But here is a ray of sunshine: the government is getting behind the small business owner.

This year, subsidies will be concentrated on bank funding and as a result lending to small companies. At the moment deficient lending remains a problem for many as lending is hard to achieve at a reasonable rate, but hopefully with the new year comes hope.

Many business leaders are behind the government’s decision. Chief Economist at the EEF manufacturers’ organisation, Lee Hopley said of the decision:

“After putting the Funding for Lending Scheme ‘on steroids’ in March, the chancellor has now doubled the dose. Putting further firepower behind the banks through FLS to make more finance available and at a lower cost should provide a further spur to lending, which is still challenging for many SMEs despite recent improvements.”

She continues: “With the recovery in business investment still weak, getting credit flowing to business is critical to turning this round.”

This change will make a big difference to millions of small firms and therefore will help unemployment levels through job creation. The housing market has recently seen a boost through the Help to Buy scheme and now attention is being averted in order to help the economy.

The aim of the government’s attention is to reduce the cost of business finance for small organisations and as a result to see an increase in the number of firms with access to such finance. And although supported some business leaders do not have much faith in the system. John Longworth, Director General of the British Chambers of Commerce, has said the real challenge involved is if the government are “able to get credit flowing to young and fast-growing firms”

He continues that at the moment “any improvement in credit availability is only being felt by ‘safe bets’, while young, fast-growing firms continue to struggle to find the finance they need to expand,”

“Policy makers need to go further to help new and growing companies by delivering a British Business Bank with far more scale than under the government’s current proposals.” He said.

Some movement has been made in order to boost lending already. Back in early 2013 the Treasury increased the amount of affordable finance banks could access. This as a result was hoped would increase the incentive to lend to SMEs. The fee banks will now pay is considerably lower as lending has fallen drastically since its 2009 peak. In 2009 lending volumes were 4 times bigger than they are today. In the three months ending in August 2013 net lending to businesses fell by a whopping £2.3billion.

The cost of finance is going up and hopefully the government will address this. In recent years there has been quite a few changes in private or personal finance yet small business and commercial finance has been somewhat left behind.
Are you a small business owner seeking finance or do you work for a national company? What do you think? Watch this space for more info.