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

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
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

Recruitment Genius: Mortgage Advisor - OTE £95,000

£40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...

SThree: Trainee Recruitment Consultant

competitive: SThree: Are you passionate about sales?Do you have a keen interes...

Recruitment Genius: Loan Adviser - OTE £30,000

£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Day In a Page

Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high
How to find gold: The Californian badlands, digging out crevasses and sifting sludge

How to find gold

Steve Boggan finds himself in the Californian badlands, digging out crevasses and sifting sludge
Singing accents: From Herman's Hermits and David Bowie to Alesha Dixon

Not born in the USA

Lay off Alesha Dixon: songs sound better in US accents, even our national anthem
10 best balsamic vinegars

10 best balsamic vinegars

Drizzle it over salad, enjoy it with ciabatta, marinate vegetables, or use it to add depth to a sauce - this versatile staple is a cook's best friend
Wimbledon 2015: Brief glimpses of the old Venus but Williams sisters' epic wars belong to history

Brief glimpses of the old Venus but Williams sisters' epic wars belong to history

Serena dispatched her elder sister 6-4, 6-3 in eight minutes more than an hour
Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy