Newspaper article The Journal (Newcastle, England)

Taking a Long-Term View of Lending

Newspaper article The Journal (Newcastle, England)

Taking a Long-Term View of Lending

Article excerpt


IF there was ever a good example of demand, it's a room full of people eager to learn how they can access loan funding from the North East Local Enterprise Partnership's Growing Places Fund.

My last column dealt with the fund - and I'd like to remind everyone that you have until November 9 to get your application in for the monies available. Check out the LEP's website for details Sticking with the funding theme, it is interesting to see the Guv'nor Sir Mervyn King publicly reiterating what all of us have known for some time that the hobbled banks are holding back the recovery.

Indeed, that is one of the reasons for introducing the Growing Places Fund, to replace some of the funding the banks will not lend because of their heightened fear of risk. Of course, it would be impossible for the Government to make a U-turn and encourage the banks to ease restrictions and lend more so alternatives are required.

One of these would be a national investment bank, the subject of a report published recently by the University of Surrey for leading chartered accountants Kingston Smith.

Their research showed that most SMEs now borrow from family or friends, or re-invest retained profits. Some 58% of SMEs used just one source of finance to start their business, and 42% rely on only one source of finance to sustain themselves.

Banks come a poor third in terms of finance sources. It concludes that SMEs need 'patient' capital, finance that is there for the longer term.

This is the only way to stimulate and sustain high-growth businesses.

The report calls for a British Business Bank.

There is a particularly strong need for property lending as banks can't lend to the property sector like they have in the past because they have been told to rebuild their balance sheets.

This creates a big problem. We have been too used in the North East region to 'gap' funding to bridge the loss between the cost of development and the lower value of the completed development. This was not sustainable and prevents the private sector from investing in the region. …

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