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Business Development & Marketing Cash Flow & Forecasting Finance General Turnaround

Retail start-ups – opportunity or lack of opportunity?

An estimated record 10,000 new retail businesses were launched in 2014 compared to 2013 according to Creditsafe, a company providing information on the health of businesses.
The new retail start-ups included shops, online retailers, cafes and restaurants and the development was being interpreted as a sign that entrepreneurs are leading the economic recovery partly because retail is seen as a major indicator of consumer confidence.
However, it remains to be seen how many of these fledgling businesses are still trading in 12 months’ time and whether this is indeed a case of entrepreneurs seizing opportunities or whether it is in fact a response to the lack of alternative opportunities.
It has been clear for some years following 2008 that retail is a volatile sector and has been in the throes of huge changes. While there are positives in the rise of the “shop local” initiatives aimed at supporting independent small traders, there has also been evidence that people have become very cost conscious and cautious in spending with smaller but more frequent trips to the shops.
Online shopping and a disenchantment with major High Street chains and edge of town superstores may indeed be a positive sign for the 10,000 fledgling retailers, but they will need to be very canny about pricing, marketing and controlling cash flow to survive.
We await the January post mortem on retail trade during Christmas and New Year, but already it looks like 2015 is going to be an interesting year.

Categories
Banks, Lenders & Investors Cash Flow & Forecasting General

Banks need an incentive to lend to Entrepreneurs and SMEs

Despite government rhetoric and its promotion of initiatives to encourage bank lending to entrepreneurs and SMEs the banks aren’t lending.
Merlin is a joke and contributes almost nothing to stimulating growth or an entrepreneurial culture in UK.
The root of the problem is banks’ inability to lend to businesses with few assets.
The Enterprise Finance Guarantee (EFG) scheme has not worked and nor will the new National Loan Guarantee Scheme (NLGS) initiative because lending because neither is underwritten by a Government guarantee, thereby exposing the banks to the full credit risks.
How different from the Small Firms Loan Guarantee Scheme (SFLGS) launched in 1981 to stimulate lending to SMEs, where the government provided a guarantee to the banks to support the lending.
The conception of the EFG and NLGS appears to convey a Government guarantee, however it doesn’t and this is why the banks are not lending under these schemes.
The SFLGS provided for a government guarantee to the lending bank of 85% of unsecured loans to qualifying SMEs who could borrow up to £250,000 (70% for companies under 2 years old).  During the 1980s – 90s the SFLGS contributed to stunning growth, helping to encourage entrepreneurs to set up and grow their business.
It was scrapped by Gordon Brown in 2006; a nail in UK’s entrepreneurial coffin, and such prescient timing.
Banks have the funds and the distribution networks, but they should not be exposing themselves to risky or unrecoverable debt and therefore are rightly wary of unsecured loans.
They need to be incentivised to lend to SMEs. Their loans need to be underwritten and the government is the only such source. Bring back the SFLGS.