It is now almost six months since Tim Breedon, chief executive of Legal & General, published the findings of his non-bank lending task force. Given its headline warning, that British businesses will face a funding shortfall of between £84bn and £191bn over the next five years, it would be helpful if Mr Breedon's proposals became a reality sooner rather than later.
Work on those recommendations continues behind the scenes, but the difficulty is devising schemes that add to the total amount lent to Britain's businesses rather than rebadging lending that would have been made in any case. There is a suspicion that rather too many government initiatives in this area, the Funding for Lending scheme, for example, have simply enabled the banks to secure guarantors for advances made as part of their everyday business practices.
Danger also lies in trying to be too clever. Mr Breedon suggested the launch of an "aggregation agency", which would lend directly to SMEs struggling to get credit from the banks, or at least work more closely with the banks in the hope of changing their minds. What he really seems to have intended is a straightforward British equivalent to Germany's KfW, the state-sponsored bank that performs exactly those functions. With a government guarantee, it raises money on cheap terms that can then be offered to other banks at preferential rates assuming it is used to support SMEs.
In Germany, KfW has also been a leading player in securitisation, which is a dirty word these days but will be required if SME debt is to become a more tradable asset (and thus more in demand from investors).
Similarly, when the London Stock Exchange launched the Order Book for Retail Bonds (Orb) two years ago, it was hoped that more companies might find the corporate bond market open to them. In fact, though this market has been successful in its aim of opening up direct corporate bond investment to individuals, as opposed to institutional investors, the companies that have chosen to raise money on Orb are large, well-known businesses that have no shortage of options when looking for capital.
David Petrie, head of corporate finance at the Institute of Chartered Accountants in England and Wales, one of those working on the implementation of Mr Breedon's proposals, tells me there is "political will" for reform. And, he points out, market conditions are currently ideal for corporate bond issuers in that investors are desperate for yield and running scared of equities. Still, almost no one is going to put their money into a single small business they've never come across before. And the cost of raising a few million pounds, or less, is disproportionately high. Aggregation may again be the answer, with companies in particular market niches coming together to raise money.
The question is when the work on these projects might be completed. From the Treasury's perspective, this is the sort of hard grind that doesn't make for eye-catching headlines, but boosting the credit supply is at the heart of the economic challenge.
The private sector is leading by example, finding innovative ways to allocate capital to SMEs. Crowd funding businesses, which use the internet to find thousands of individual lenders for small businesses searching for capital, are growing so rapidly regulators can barely keep up. The Financial Services Authority urged caution on members of these sites last month.
Now, there is certainly a debate to be had about whether peer-to-peer sites should be the preserve of sophisticated investors, as the FSA suggests. But at least these businesses are getting on with finding ways to fund SMEs that have been let down by the banks.
High-street initiative to link up small retailers
Independent retailers often struggle in the face of competition from out-of-town shopping malls and the online offerings of larger rivals, so an initiative being piloted in Hereford is worth watching.
Open High Street, which goes live today, enables independent retailers in the town to offer their wares online via a single website. Customers who buy from more than one retailer can have their purchases dropped off in a single delivery.
The project is the brainchild of the consultancy Inzenka, whose managing director, Larry Zentner, says: "This is a way for local retailers to work together to reduce costs and serve their customers in a much more focused way".
Assuming the Hereford pilot is successful, Inzenka hopes to roll out Open High Street across the UK and to develop additional services – drop-off and pick-up of dry cleaning, for example.
Small cap sector shows 29 per cent return
Hands up if you can identify the stock-market sector that has produced a 29 per cent return so far this year.
New issues on the Alternative Investment Market may have been infrequent during 2012, but many of those that have got away have performed impressively, reports Allenby Capital. The small-cap specialist points out that of the 31 companies raising funds on Aim this year, 22 are trading above their issue price. The average return across all 31 new issues is 29 per cent.
Allenby also points out that Aim businesses continue to attract premium valuations from trade buyers. As of the end of July, 30 companies had delisted from Aim this year after being bought out, with an average premium to their share price on the day preceding announcement of the deal of 47.6 per cent.
However the junior market continues to struggle. Just 11 companies joined Aim during July, while 10 more businesses dropped their listings. Still, at least July was the first month this year in which the total number of companies on Aim rose.
Small business man of the week: Rob Symington, co-founder, Escape the City
Three years ago Dom Jackman [Symington's business partner and co-founder of Escape the City] and I were still working as management consultants but for some time we'd both known that we wanted to do something else – something more fulfilling.
The problem was that we just couldn't work out how to make the leap, and talking to other people in a similar position to us, it seemed they couldn't either.
"We had so many of those conversations that in the end we realised there was a business opportunity in our dilemma – if we could match all of the people we knew who were looking for a way out of their current working lives with the sort of opportunities they actually wanted, then we'd be on to something.
"We started out as a simple jobs board, but it began to make a bit of money and we realised we had a viable business worthy of investment. Now we've got more than 80,000 members and hundreds of employers posting the sort of jobs of which people have always dreamed.
"We raised £600,000 from our members this year and we're two months into a two-year business plan. About 90 per cent of that money was for salaries because our business is people-intensive. We're really looking forward to the future.