The Government has made significant progress in delivering better access to finance for small businesses but must develop a strategy for the next decade to ensure momentum is not lost, according to the CBI.
Thanks to a series of effectively-targeted and managed schemes, initiated by the Small Business Service, entrepreneurs now find it easier to raise money to start and grow businesses where previously it was unavailable, it claimed.
But while the SBS, the agency charged with improving the enterprise environment in the UK, deserved praise on this issue, the CBI said it was concerned that financial gaps were starting to emerge which "must be plugged to build on the achievements of the past few years".
It noted: "Many venture capital firms are seeking less risky investments in the current economic climate, and are also beginning to call in their stakes rather than seek further opportunities. Raising capital for innovation which does not provide a high rate of return, is increasingly a problem too."
In a report published today the employers' organisation says the Government must examine how business demand for finance over the coming years can be met and make a series of recommendations to achieve this. The CBI is also calling on the Treasury to straighten out a series of anomalies in tax incentives designed to encourage more finance for small companies.
It stated: "Giving companies tax relief on capital expenditure is a proven incentive for investment. However, firms are eligible for these allowances only when they become profitable. This does not support new and growing businesses who are investing for growth ahead of achieving profitability.
"The Treasury should demonstrate its commitment to enterprise by making capital allowances available to these firms too.
"Tackling this anomaly and other measures, for example making the incidental costs of raising money through issuing equity subject to corporation tax relief, would stimulate more investment, particularly for research and development, and business growth.
John Cridland, CBI deputy director-general, said: "The Small Business Service has struggled in many policy areas but has at least succeeded in delivering better access to finance for new and growing companies.
"It has listened to business and provided opportunities where the private sector has not been able to. It has not been afraid to adopt successful private sector methodology and has been rewarded."