New £5m fund to help east coast SMEs

SMALL and medium-sized businesses in the east of Scotland are being targeted with the launch of a £5 million fund that its backers hope will support the creation of hundreds of jobs.

The East of Scotland Investment Fund (ESIF) brings together nine local authorities and will provide loan finance up to 50,000 with repayment periods stretching to five years.

Some 1.7 million of funding has come from the local councils, based in Angus, Dundee, Edinburgh. Falkirk, Fife, Midlothian, Moray, Perth and West Lothian.

ESIF has also secured almost 1.8m from the European Regional Development Fund with the remaining 1.5m comes from Royal Bank of Scotland.

The new fund, based in Glenrothes and overseen by fund manager Andrew Dickson, is modelled on the West of Scotland Loan Fund, set up 14 years ago. It is hoped ESIF will support more than 300 new and growing SMEs, safeguard some 700 jobs and creating up to 1,000 more.

Fund chairman George Sneddon said: "It is well documented that access to finance remains a major hurdle to many SME's who need to develop and grow.

"The fund will contribute significantly to the east of Scotland business community."

The big banks have come under fire from business groups and industry - accused of not doing enough to support small firms as the economy hauls itself out of recession.

A report this week by Absolute Invoice Finance suggested a growing numbers of SMEs north of the Border were turning to alternative sources of funding in order to preserve cashflow.

Absolute said the number of small enterprises securing invoice finance facilities in order to release cash into their businesses rose by 44 per cent in the second quarter, compared with a year earlier. In a further sign of the funding challenges facing businesses, Bank of England data this week showed that lending to private non-financial companies had fallen again last month. The 0.4 per cent month-on-month drop in June followed a 0.6 per cent fall in May, taking the year-on-year decline to 4.4 per cent.

Howard Archer, chief UK economist at forecasting group IHS Global Insight, said: "(The] Bank of England data do little to alleviate concerns that ongoing tight credit conditions remain a serious handicap to growth and it is a particular problem for smaller companies."