A new Governmental Small Business Finance Forum will be playing host to a number of business groups today with focus placed heavily on creating a plan to help small businesses pull through the storm that is he current economic slump.  The Business Secretary, Lord Mandelson and the Business Minister, Baroness Vadera, will moderate the meeting.

On the 23rd October, Lord Mandelson met with the banks and came to the conclusion that he was going to establish a discussion forum where the two sides, banks and small businesses, could resolve their differences.

The forum will be looking at taking a stronger stance against the situation that small businesses are facing with certain banks, which have been chopping and changing their credit schemes recently.  Representatives from the banks will be present at the meeting.  The forum also plans on working out a number of tax breaks that should be made available to small businesses and also hopes to make better use of schemes already set in place for small businesses.

The CBI (the Confederation of British Industry) and the BCC (the British Chambers of Commerce) can be heard amongst those voices calling for banks to utilise existing Small Firms Loan Guarantee schemes, giving a state guarantee for up to 75pc of the overall value of a loan to a commercially feasible business that can’t come up with the assets needed to secure a loan against.  The CBI and the BCC also state that banks should take full advantage of the recent European Investment Banks funds available to them for smaller businesses.

David Frost, the British Chambers of Commerce’s director general, said that his establishment had “serious concerns about the availability of credit and the tightening of credit conditions for small businesses”.

The Confederation of British Industry will also utilise the forum as a soapbox to petition for initiatives in this month’s pre-Budget Report.  The head of enterprise at the CBI, Lucy Findlay, said that the organisation wanted to see the predetermined one percentage point rise in corporation tax paid by smaller companies demolished.  The CBI will also demand that recent legislation proposals that provide new taxes on family businesses should be set back another year.  The organisation is also eager for professional advisory costs of raising equity investment to be made tax deductable, in the hope that doing this will bring the tax treatment of equity fund raising to the same level as bank borrowings.

David Frost went on to say that, “If things carry on like this, many sound UK businesses will be bust by Christmas,” he warned. “We have received numerous calls from small businesses who are trying to manage cash flow, but credit such as overdrafts are being withdrawn indiscriminately and terms changed without notice.”

Concerns about the availability of credit has recently given great cause for panic around the country and business leaders have broadcast warnings that supposed “sound” small businesses could go bust by Christmas as they struggle with the financial difficulties that are facing them everyday.

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