MPs launch inquiry into the financing of SMEs

A cross-party Committee of MPs will examine the key challenges SMEs face when seeking finance, the regulation of small business lending, and the role the government can play in enhancing lending to small businesses.

In the wide-ranging new inquiry, the MPs will investigate the accessibility of finance, the role of financial innovation in business lending, and the role of the Bank of England’s Term Funding Scheme, credit reference agencies and government state aid in encouraging small business lending.

The Committee will also explore whether SMEs have adequate access to a complaints procedure for disputes with banks or lenders, the effectiveness of the Business Banking Resolution Service, whether business lending should be regulated, the impact of Basel 3.1 reforms on access to finance, and the performance of the Financial Ombudsman Service (FOS) in handling complaints.

The MPs are also set to consider the role the government can play in enhancing access to small business finance, the impact of covid schemes on businesses, and the role of the British Business Bank.

The Committee invites written evidence submissions on the inquiry terms of reference.

Commenting on the new inquiry, Harriett Baldwin MP, chair of the Treasury Committee, said: “Small businesses are the lifeblood of local communities, powering economic growth and fostering innovation and an entrepreneurial spirit.

“As a Committee, we’ll be examining whether small businesses are able to access the finance they need to grow and develop, whether there is adequate regulation of the sector, and if government can take a more active role to support business growth.

“We look forward to receiving written evidence on this important topic and taking oral evidence later in the year.”

Tech expert Josh Boer, head of sales, Europe, VeUP said: “With stubborn inflation and rising interest rates, giving SMEs access to funding should be a top priority to drive growth and get the economy moving again.

“Our entrepreneurs and innovators shouldn’t have to beg to be supported. The systems should already be in place so that investors are lining up to help, spotting a fantastic opportunity and turbocharging the next generation of SMEs.”

Steven Mooney, CEO of FundMyPitch said, “The lack of access to funding for UK entrepreneurs warrants a parliamentary inquiry and more. SMEs make up the vast majority of businesses in the UK, spreading opportunity, skills, and employment, yet so many of them aren’t taken seriously enough by investors and the big banks.

In tough economic times with trading costs surging, getting financial backing is make or break for many of these innovative companies. This inquiry needs to explore the mechanisms in place to enable valuations and allow up and coming companies to have a platform to reach the investors they so desperately need to drive growth for the long term.”

Fintech entrepreneur Khalid Talukder, co-founder, DKK Partners said, “The chronic underfunding of SMEs will have severe economic consequences if we fail to act. This inquiry needs to get to the bottom of why accessing credible financial support is such as challenge in the UK compared to other parts of the world.

“Fast-growing companies need finance to hire talent, develop their product offering and compete in the global arena. Key to this effort should be encouraging international trade and giving them access to the latest payments technology to allow them to operate in dynamic emerging markets.  Otherwise, will fall behind rapidly as other countries take the initiative hence harming our own economic growth,” added Talukder.

Climatetech expert Laimonas Noreika, CEO and founder of HeavyFinance said, “Without funding systems in place, scale-up companies and larger businesses will not only struggle to grow, there is also a risk they deprioritise tackling emissions and developing environmentally friendly business models.

As part of this inquiry, MPs need to explore why access to finance is such a big issue but also the role funding plays in improving the wider economy and the environment. We cannot have a system in place where society and the government tells company owners to go green, and then denies them access to the funding they need to do it,” he added.