Posted on Thursday 21 June 2012 by Ulster Business

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The Executive should consider making an extra £25m-£30m a year available to support venture capital mezzanine funds as a supplement to standard bank lending, according to a leading business group.

CBI Northern Ireland made the recommendation in ‘Getting growth finance going – creating a platform for economic success in Northern Ireland’, a report on the availability of finance to businesses in Northern Ireland.

The report concluded Northern Ireland is suffering from a finance gap which is hindering investment and growth and holding back job creation

The organisation said that the lack of available credit is an issue of increasing concern and one of the most significant challenges facing the Executive as it seeks to create 25,000 jobs over the next few years.

The CBI made a series of recommendations including the provision of up to £30m of funding per annum to support seed-corn venture capital mezzanine funds, in addition to Invest NI’s existing Growth Fund. This, it said, could make a considerable impact over the next three years on the number of companies able to secure funding, through to £1m+ investments.

It also recommended moving towards a position in which the funds supported by the Executive have a “genuine funding continuum” so there is a longer term approach to government backed funds.

In addition CBI believes Invest NI should make available some form of “financial voucher” based on the successful innovation voucher scheme.

On traditional bank lending CBI said the Executive must get more accurate live data – which need not be disclosed - on the scale of the funding gap and current lending trends to allow it to understand the extent of the problem and develop a clear strategy to address liquidity issues.

CBI NI chairman Ian Coulter said he would like to see Government, banks and businesses move closer together on the issue so there was more than anecdotal evidence circulated about whether banks were lending and what size of businesses they are lending to.

Mr Coulter also told journalists that while the government could help by “writing a few cheques” finding a solution to the access to finance problem was primarily a concern for banks and businesses to address.

He said there was a need to encourage banks to introduce longer term lines of credit in order to give SMEs more certainty over cash-flow to help offset Northern Ireland businesses over-reliance on overdraft facilities and the current cautiousness of businesses over using them.

Mr Coulter added: “There are no single or simple solutions to the funding challenges faced by the business community. There are complex issues to be understood and a range of issues need to be addressed by the Executive, by financial providers, by businesses themselves and other key stakeholders.”

He added: “The provision of appropriate volumes and types of finance is essential to supporting the economic recovery. The report identifies some of the most immediate issues and some practical steps to mitigate the impact of the likely short and medium-term liquidity issues that our economy faces. We must also create a stronger funding eco-system for the future. While there is an on-going debate about the causes of the financial gap the reality is that funding conditions have changed dramatically and our banks, our businesses, and our Executive need to work together better.’”

CBI said it was keen to engage with the Executive to discuss its findings and help it fully understand the situation.

Mr Coulter added: “I hope they will establish a small taskforce to focus solely on these issues and develop a concise action plan by September. The Executive must also engage with the UK Government to ensure the new ‘Funding for Lending’ scheme announced last week is practical for Northern Ireland banks to participate in, and ensure the funding is easily accessible to small and medium-sized businesses.”

To see the full report click here  


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