Introduction to businesslink.uk

1. Introduction to businesslink.gov.uk Recent developments in the SME sector in the UK focusing on how government and the private sector are addressing the developments relating to finance David Dinsdale Director – businesslink.gov.ukChairman – Institute of Directors (Buckinghamshire Branch)email – david.dinsdale@businesslink.gsi.gov.uk

2. Changes in the structure of UK businesses • Key trends • Overall number of businesses slightly lower – 0.5% (2008 to 2009) • Increase in lifestyle businesses in the recession – hairdressers at home etc. • General move to incorporation from sole proprietors and partnerships. • Sources • Inter departmental business register - http://www.statistics.gov.uk/CCI/nugget.asp?ID=195

3. Optimism of UK SMEs (Nov 09) • Sources • Confederation of British Industry - http://www.cbi.org.uk/pdf/20091102-cbi-sme-trends-survey.pdf

4. Key principles for UK Government support • Business support is provided by government in the UK based on several criteria. These are: • Rationale – whether there is a market failure in provision or wider social or environmental justification for intervening • Likely effectiveness – whether an intervention addresses objectives • Business need – whether there is a genuine demand from business for the type of support offered • Sources • UK Government - http://www.berr.gov.uk/whatwedo/enterprise/simplifyingbusinesssupport/page44804.html

5. UK Government support for businesses • In 2006, UK government initiated a simplification process to rationalise over 3000 schemes to 100 or less by 2010 • Key schemes in the Finance area are: • Understanding Finance for Business • Small loans for business (up to £50k) • Finance for Business including • Enterprise Finance Guarantee Scheme • Sources • UK Government - http://www.berr.gov.uk/whatwedo/enterprise/simplifyingbusinesssupport/page44804.html

6. Enterprise Finance Guarantee scheme • The scheme was introduced on 14th January 2009 to replace the Small Firms Loan Guarantee Scheme (SFLG) • £1.3bn available in total • Progress to date (Jan 2010) • Compared to 08/09 (SFLG) • Key criteria is the business must have a bankable proposition but insufficient assets to secure a traditional bank loan. • Sources • UK Government - http://www.berr.gov.uk/whatwedo/enterprise/simplifyingbusinesssupport/page44804.html • Small Firms Loan Guarantee Annual Review - http://www.berr.gov.uk/files/file52193.pdf

7. Emerging sources of finance other than banks

8. What is Zopa? • Imagine you want to borrow £1000 from these people offering funds... whose money would you choose? • By selecting the cheapest rates, you’d be able to assemble your £1000 loan at an average rate of 8.2%. • Similarly, Zopa is a marketplace where lenders and borrowers get together to sidestep the banks for a better deal, with borrowers paying on average 20% less than they would from their bank, assuming of course their bank actually had the funds to lend. • Zopa facilitates by: • Credit checking all the borrowers to minimise risk and keep lenders’ money as safe as possible • Assembling the cheapest loan available for each borrower • Administrating the loan; handling contracts, requesting and processing repayments and employing a collections agency where necessary • Spreading lenders’ money across many loans (typically over 50) so that their risk is diversified • Keeping everyone’s details secure and private

9. We’re about to celebrate our 5thBirthday • We launched in March 2005 and now: • We have more than 350,000 members; 8,800 currently have loans from more than 17,000 lenders • Our lenders have loaned out more than £66m in total so far and Zopa is currently enjoying growth of over 100% year on year • Our lenders have suffered just 0.7% bad debt to date. We only lend to credit-worthy borrowers who can afford their loan, and we steer well clear of anything that could be called near- or sub-prime • Our charges are low, transparent and up-front, so there are no sneaky fees or nasty surprises for any of our users • Zopa borrowers can also make over-payments or early repayment with no penalty or admin charge • Our borrowers tell us they prefer borrowing money from and paying interest to real people than banks • Dave from London told us, “Never has borrowing money been such a relaxed and "fun" experience. Next time I need a short to medium term loan I know exactly where to go to.”

10. How do businesses find support in the UK – by phone, face to face and online. 9 Regional Services

11. Key statistics about the services Slide 10

13. Key areas of support sought by businesses • From traffic to businesslink.gov.uk, the top 4 rarely change: • Theme Visits per month (ave) • Employing people 250,000 • Taxes, returns and payroll 200,000 • Starting up 150,000 • Finance and grants 120,000 • These themes account for about 40% of all traffic to businesslink.gov.uk

14. Key recommendations for policy makers • The principles of support in the UK (market failure, likely effectiveness and business need) are good principles for designing policy and interventions • Schemes like the Enterprise Finance Guarantee fill a gap for many thousands of businesses • A significant amount of business finance is offered by friends & family. Many people would like to see government alter the tax treatment of investments by friends and family in businesses, particularly re losses. • Other innovative sources of finance are emerging and popular (e.g. zopa.com) • Businesses prefer one place to go to find out information about all help available to them; finance, grants, other support • Finance is often one of many areas of support that a business needs. Services like Business Link can help identify those needs. Finance alone may not help. • Many people in the UK think that government SHOULD back their business. It is important to be clear when help is and is not available.