Doug Richard: Now our start-up companies can bank on angels for investment

Small Business: There is nothing new about banks being a bad option for British entrepreneurs looking for finance

This party conference season, we've seen both the Government and Opposition jostle for position to take the biggest shot at the banking sector. First up was Ed Miliband with a familiar call to separate the retail and investment arms of the major players.

The Business minister Michael Fallon has also been on the attack, writing to bank CEOs to question their commitment to the government's Enterprise Finance Guarantee and threatening to name those who do not use it to increase lending to small businesses.

All this against the backdrop of the news that bank business lending fell by £1.2bn in August. With politicians on both sides queuing up to preen their business credentials, it's no surprise banks are taking a public flogging. Banks are not only an easy target, but when it comes to SME financing, they're fundamentally the wrong target. Attempts to force the banks to lend more to small businesses are a waste of time, demanding something that is fundamentally against the banks' nature.

Banks are not going to change their low-risk lending criteria, and though political broadsides may play well to the gallery, they are of little value to small business owners looking to grow a business, or entrepreneurs seeking funding to get an idea off the ground. Nor is it the role of government to be giving banks orders about what they lend, and to whom.

That is not to say the Government is powerless to help boost the enterprise culture so vital to the UK's economic future. When it acts on a unilateral basis, controlling what is in its gift, the Treasury can be a powerful force for Britain's business good. The biggest economic lever at the unique disposal of the Government is, of course, tax. The best thing the Treasury can do to boost enterprise-led recovery is make the UK a desirable place to do business in tax terms.

It is showing what is possible with the Seed Enterprise Investment Scheme (Seis), exactly the sort of initiative needed to ensure the UK economy rises out of recession on a wave of start-up activity. Seis offers tax relief rising to 50 per cent on investments of up to £100,000 in small businesses. By targeting investments in young start-ups (those whose trade is no older than two years, employing no more than 25 and with maximum gross assets of £200,000), it will help drive finance towards the small businesses that need it most.

A genuinely radical move, Seis promises a twin benefit for British business. By widening the pool of business investors, it will go a long way to narrowing the funding gap for small business owners who hit a brick wall seeking funding from the banks or other traditional means. By shifting the focus on to angel investors, it can also herald a change of culture about start-up capital.

There is nothing new in banks being a bad option for entrepreneurs looking for finance. Many will fail to get their proposal past first base, and those who do land a loan are unlikely to be shouting about the terms. But where small business owners might once have claimed with justification that their hands were tied, sufficient options are now available to make banks the last port-of-call.

Angel investment remains an attractive source of funding for start-up owners, who can rely not only on up-front capital but the advice and support of an experienced business owner fully invested in the success of their venture. As someone who works closely with aspiring entrepreneurs at my School for Start-ups, I have often seen how important mentoring can be for those looking to start a business for the first time, and the guidance of an angel can make all the difference in helping new business owners get past the teething and early-stage growth pitfalls.

Where access to finance is concerned, online platforms are revolutionising the way entrepreneurs look for investment. The growth of crowdfunding and peer-to-peer lending sites means small business owners can now access widespread networks of potential investors rather than be restricted to high street bank s.

Entrepreneurs are already embracing the flexible funding options out there, sidestepping the banks' unwillingness to lend to SMEs. It's time policymakers dropped their obsession with forcing the banks to lend, and caught up with them.

Doug Richard is beginning his "Windows of Opportunity" roadshow, to highlight alternative small business financing options, in Nottingham on 11 October. Visit: schoolforstartups.co.uk/woo

Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
Voices
Hunted: A stag lies dead on Jura, where David Cameron holidays and has himself stalked deer
voicesThe Scotland I know is becoming a playground for the rich
News
people
PROMOTED VIDEO
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
News
Shami Chakrabarti
people
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites Star Wars 7 rumours
Sport
football
News
news
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker