Business groups join up to demand overhaul on small firms' financing

Five business organisations have joined forces and will today demand that governments on both sides of the Border improve their funding schemes for small firms.

Their call comes as Peter Hughes, chief executive of trade body Scottish Engineering, renewed his attack on the high street banks for a lack of lending to small manufacturers.

The five business bodies - the Federation of Small Businesses, Institute of Chartered Accountants of Scotland (Icas), Institute of Directors, Scottish Chambers of Commerce and Scottish Financial Enterprise - said their "practical recommendations" would help to resolve the problems that SMEs are having in accessing funding.

Proposals put forward by the organisations include:

Lowering the threshold for the coalition government's business growth fund, unveiled as part of "Project Merlin", from 10 million to 2m to make it more attractive to SMEs;

Extending Enterprise Investment Scheme (EIS) tax relief by giving individuals the chance to lend to firms on commercial terms, helping SMEs that require short- to medium-term finance;

Promoting the Enterprise Finance Guarantee to more firms;

Not confining the Scottish Government's 94m loan fund to specific sectors, but instead opening it out to all businesses.

David Wood, Icas executive director, said: "Affordable finance remains an issue for the majority of SMEs despite the many measures that have been introduced to improve the situation.

"We firmly believe that our joint statement offers a signal of intent - if we work together, solutions can be found."

His comments came as figures from Scottish Engineering showed manufacturing businesses enjoyed a fifth quarter of rising orders and output.

Hughes said: "Our members have become more efficient and competitive so they are now reaping the rewards for several years of hard graft allowing them to win contracts successfully in world markets."

But he warned: "It is quite shocking how banks are continuing to treat engineering companies with bulging order books.

"They are either being refused funding or are being offered it at such punitive rates as to make it unviable."

Several banks have launched schemes to encourage SMEs to apply for more funding.Clydesdale Bank yesterday said it was rolling out its "growth finance programme" for companies with rapid-rising sales that are expected to deliver profits in the next nine to 24 months.

Firms that have already benefited from the pilot phase of the scheme include Aberdeenshire-based oil well engineer Red Spider Technology, artificial limb maker Touch Bionics and gas monitoring firm Cascade Technologies, both of which are based in Livingston.

l Data released today by the Engineering Employers Federation will show that UK manufacturers are recruiting additional staff as they become more confident about the outlook. But the 500 firms surveyed warned about rising commodities costs.