Three of the Funding Options team attended yesterday’s launch event of the NESTA/Telegraph consultation on “credit easing“. It was a fascinating event with an excellent panel, and we were delighted that Funding Options was mentioned in the Chair’s opening remarks (you can see the video here).

The discussion centred around the concept of an “SME Bond Market”, with Will King of @KingofShaves giving a great account of his “shavings bond“ experiences.

A repeated piece of audience feedback, echoing some of the more nuanced recent press commentary – such as Anthony Hilton’s views in the Standard - is that the an “SME Bond Market”, whilst a fantastic option for medium-sized firms, is not practical for small firms, which – in volume terms – represent a segment an order of magnitude larger (totalling some half-a-million term loans alone): typical financing sizes are small (the average term loan to firms under £1 million turnover is less than £100,000), meaning that direct bond issuance is not credible on cost grounds.

The Federation of Small Businesses (FSB) has made exactly this point today:

“Treasury is looking at the direct purchase of corporate bonds in small and medium sized enterprises, through the creation of a new market as one way to make the credit easing scheme work. 

The FSB believes that this would miss the very smallest of businesses that need access to small amounts of finance, as those businesses would not have the manpower to develop bonds. And, the value of bonds from a micro firm would also not be large enough to prove efficient for the Government to be a bond investor.”

We agree, and believe that – whilst there is no single ‘silver bullet’ – the application of modern technology – as well as better involving trusted expert advisors of small firms – is a good place to start.

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Conrad Ford has written 2 post in this blog.

Conrad Ford is the Managing Director of Funding Options.

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