Flexible project investments:a proposal for a new form of debt finance for SMEs

Quested, Gareth and Sameen, Hiba and Douglas, Brett (2013) Flexible project investments:a proposal for a new form of debt finance for SMEs. The Work Foundation, London.

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This paper addresses the need to develop new financial products, as was expressed in the report of the industry-led taskforce on alternative debt markets: Boosting Finance Options for Business. This Taskforce, chaired by Tim Breedon, was given this objective by Vince Cable, Secretary of State for Business, Innovation and Skills: "To examine structural and behavioural barriers to the development of alternative debt markets in the UK, building on recent work on this subject, and to make evidence-based recommendations to Government ahead of Budget 2012 on practical measures to facilitate the development of these markets." As the Taskforce report explains, financing for small and medium-sized enterprises (SMEs) has suffered due to the lack of supply of their main source of funding: bank loans and credit. Further, the ability and willingness of banks to lend to businesses is likely to be constrained in future as banks become more risk averse and are required to build up capital requirements to reduce macroeconomic volatility in the future. The report proposes a variety of ways that other forms of financing can be provided to SMEs. This paper presents a new form of financing for SMEs, which is a variant of project bonds. To meet the specific needs of SMEs, appropriate features of other financial instruments have been drawn upon.

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12 Mar 2014 16:35
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22 Nov 2022 12:46