As tougher economic conditions begin to bite and traditional credit options evaporate, only those businesses tightly managing their liquidity and seeking out alternative sources of credit will survive the downturn.
Conserving cash, managing customer credit lines and reducing working capital needs will all improve liquidity, but in the majority of businesses access to credit will remain crucial in the weeks and months ahead.
Our challenge is to work together to ensure West Midlands businesses – in particular our SMEs – access the support they need to secure their long-term viability.
Ensuring liquidity is what will keep our region working.
This week, the Government unveiled a package of measures designed to address just this issue.
The support package consists of loan guarantees and a new Enterprise Fund aimed at helping companies struggling to access finance for working capital and investment including:
Under the Working Capital Scheme, banks will submit a portfolio of loans to businesses (lending to businesses with turnover up to £500million) to BERR. BERR will guarantee up to 50 per cent of the value of the portfolio, securing up to £20billion of bank lending.
An Enterprise Finance Guarantee Scheme, securing up to £1.3billion of additional bank loans to small firms with a turnover of up to £25million.
A £75million Capital for Enterprise Fund (£50million from government, £25million from the banks) to invest in small businesses which need equity.
Advantage West Midlands has also committed £9 million to set up the Advantage Transition Bridge Fund that is helping to address the problems businesses are already facing in obtaining credit through banks and other traditional routes.
It offers SMEs viable businesses loans of between £50,000 and £250,000 to help bridge the gap.
Eighty-three applications have been received to date and so far, 25 loans have been approved totalling £3.8 million. Twelve companies have drawn down £1.8 million, safeguarding about 1,700 jobs.
This financial support from government is essential to ensure firms get the help they need to plan for the times ahead and come out stronger on the other side.
So what is the best first step to take? Free and impartial advice is available through Business Link West Midlands and its credit crunch hotline on 0845 002 0900.
Firms will be signposted to finance support that is not just vital for business – it is vital for the long term prosperity of our region.
* This column is sponsored by AWM