Small Talk: Let's give a warmer welcome to Vince and his Business Bank
Government isn't much fun – just ask Business Secretary Vince Cable, who in pre-coalition days was routinely lauded as politics' voice of reason, but who today has barely a friend to his name. The latest Vince wheeze to get a kicking is the Government's new Business Bank, which he hopes will be able to turn £1bn of taxpayers' money into £10bn worth of support for small and medium-sized enterprises.
The Business Bank is getting a chilly reception because Cable has dared to use the "S word". The concept of securitisation is most closely associated with the financial crisis and the idea that a Government-backed lending scheme for SMEs might use the same techniques as Northern Rock and Lehman Brothers isn't doing it many favours. That's rather misguided, and in his previous incarnation Cable would have got a fairer hearing. There's nothing wrong with securitisation itself – it simply means parcelling up assets and selling them on to investors. It is then possible to use the proceeds for other business activities - to fund more lending, for example.
The key is the assets the bond issuer chooses to parcel up. Put together a stack of cruddy sub-prime loans that should never have been made in the first place, and one is asking for trouble. Build bonds with diversified portfolios of loans to good quality SMEs, on the other hand, and there should be much less cause for concern.
In fact, there's nothing particularly clever or original about the proposals for the Business Bank. It's more or less a straightforward rip-off of the ideas underpinning KfW, the German state-backed bank. That's not a criticism – KfW works very well providing finance to growing German companies.
The idea is that our existing lenders would continue to operate as the frontline funders of loans to SMEs, offering facilities over an extended period – five or more years, say. But they'd be more willing to do so knowing they'd then be able to sell most of the loan on to the Business Bank, tying up far less capital against such liabilities. The state-backed institution would then group packages of such loans together to issue as securities on the corporate bond market.
It wouldn't only be SMEs that benefited. Corporate bond investors are desperate to find new sources of income-generating investment, particularly in the current environment, but would be reluctant to invest in a bond issued by a single SME.
Are there downsides to the Business Bank proposals? Well, the biggest is that this model isn't likely to be much use to SMEs currently finding it hardest to access finance. It really only suits larger companies and wouldn't work for start-ups, or micro businesses, the most credit-starved SMEs of all. Still, it's not the only game in town. The Business Bank itself may find other ways to support smaller companies – by simple underwriting of private lending, for example – and being able to lend wholesale, to the new breed of lenders emerging as small-scale rivals to the banks, will help.
Fusionex Aim listing hopes to raise £15m
Want to know how Barack Obama pulled it off last week? Check out the technology used by his back-room staff to process vast amounts of intelligence about voters across the US.
Big data – how to work with large and complex data sets – is the phenomenon of the moment in IT right now, and in the business intelligence sector its applications are even more numerous than in politics.
Enter software solutions provider Fusionex, a big data specialist that will today announce its intention to list on the Alternative Investment Market (Aim) – it hopes to raise up to £15m and will have a market value of £80m or so.
Fusionex has a string of big-name clients, and sells software in two sectors – business intelligence and transaction processing.
It has been profitable in each of the past five years and is led by a management team with experience from firms including Accenture, Ernst & Young, Microsoft and IBM.
"Aim will provide an ideal platform to accelerate the group's research and development initiatives whilst providing investments and working capital to fund geographical expansion," says managing director Ivan Teh.
This is definitely the week to do your own thing
If you're thinking about starting your own business, it's worth noting that today is the first day of Global Entrepreneurship Week.
Run by Youth Business International, a network of not-for-profit organisations chaired by the Prince of Wales, the initiative takes place in more than 115 countries this year.
There are events taking place all over the country, offering everything from useful advice on how to stay on top of your taxes after setting up on your own to sponsorship schemes for young entrepreneurs.
The organisers say last year's campaign reached 213,000 people.
You can find out more at www.gew.org.uk.
Small Businessman of the Week: Charlie Gilkes, co-founder, Inception Group
I started out during a year off between school and university when I began promoting club nights at bars and clubs in London. One of the clubs asked me to co-promote an evening with one of my biggest rivals, much to the annoyance of both of us, but it was a huge success – that was the start of my partnership with my co-founder, Duncan Stirling.
"Our aim was always to do something for ourselves and in 2009, we opened Bart's – it was the height of the recession and 50 pubs and bars were closing every week, but we were confident our speakeasy concept would really work.
"It was hugely risky and we did have the odd moment when we wondered whether we were mad. But we just had a real belief in the place, which has turned out to be well-founded – it's now turning over £1m a year."
"We've also opened two more venues in London – Maggie's, our 80s-themed nightclub, and Bunga Bunga, which is a food, drink and entertainment venue. We're already working on two other sites and we have the contract to do two more on the South Bank.
"Total turnover is now around £5m and we'd like to double that in a year or so.
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