THE ICAEW SME Funding Adviser scheme

1. THE ICAEW SME Funding Adviser scheme Clive Lewis, Head of Enterprise

2. Contents • Background to the scheme • What’s the problem being addressed? • Details of the scheme • What’s in it for member firms? • How is the scheme being promoted? • Statistics on Business finance • QAD issues

3. Background • Government concerned that not enough SME’s getting independent advice on business finance • Formed Government and Accountants Working Party • Chaired by Michael Snyder (Senior Partner, Kingston Smith) with representatives of H M Treasury, Small Business Service, small business organisations, ICAEW and ACCA

4. Facilitating Finance Report • This was produced in September 2004 • Recommendations included: • Introduction of SME Funding Adviser scheme • Development of a Financial Healthcheck • Business Link operates “intelligent signposting” to SMEs wanting finance advice • SBS to produce two “No-nonsense Guides to Finance”

5. Post Facilitating Finance Report Events • It became apparent in discussions on implementation of the report that the proposed scheme would not fully satisfy the needs of government or meet the criteria set by ACCA and ICAEW • ICAEW took the decision to lead the way by putting its own scheme in place • ACCA may put its own version of scheme in place later

6. What problem is being addressed? • Most small businesses go straight to a bank when seeking finance for their business. Most do not consider whether they could manage their resources better thereby avoiding the need for additional finance • Without independent professional advice businesses sometimes end up either being refused finance or being offered inappropriate finance. • The scheme will offer smaller businesses the opportunity to discuss their business’ needs before approaching a finance provider • The independence and reliability of the advice is paramount

7. What is the scheme? • Using the ICAEW on-line Directory of Firms, businesses, banks or Business Link can search for practices offering finance advice in their area. • If the business already knows the type of finance it requires it can search on the particular specialism (such as bank loans and overdrafts)

8. Joining the SME Funding Adviser scheme Entry form – hard copy Where your entry will appear and where you can update it

9. The ten specialisms are… • Bank loans and overdrafts including SFLG (1330) • Business plans for bank and equity finance (1591) • Business start-up (own funds and family finance) (1532) • Small scale equity (e.g. Business Angels) (397) • Asset finance (960) • Corporate finance (equity issues, MBOs, debt refinance, etc) (815) • Invoice discounting and factoring (761) • Grants (721) • Leasing and hire purchase (835) • Share valuations (1051) Numbers indicate take-up of the scheme by firms. The total is approximately ICAEW 1,900 offices

10. The detail… • Practices who list at least the first four specialisms are labelled SME Funding Advisers. • Businesses seeking finance but unsure what type of finance they need or high growth businesses might want might seek advice from an SME Funding Adviser • Some financing activities are defined as investment business under the FSM Act 2000 and require the practice to be either registered with the FSA or the ICAEW as a the Designated Professional Body regulations • The SME Funding Adviser website gives detailed guidance on when the FSM Act regulations might apply in each of the ten specialisms.

11. What’s in it for member firms? • Unlike the other specialisms with the ICAEW DOFs the SME Funding Adviser scheme is free to practises • The scheme offers a practice the opportunity to signal to the marketplace an important service offering.

12. How is the scheme being promoted? • There is an link to the scheme through the businesslink.gov website, the official government service for new and small businesses (average 70,000 visits per month) • Media campaign in national and regional press • Advertising campaign on small business websites to drive traffic to on-line directory

13. Some statistics on SME finance • 2 million business use an overdraft (£12bn o/s) • 2 million use credit cards (annual spend £1.4bn) • 900,000 businesses use term loans (£64bn o/s) • 900,000 businesses use leasing or HP (spend £2bn pa) • Grants used by 250,000 businesses (£7.6bn over 3 years) • 100,000 businesses use factoring and discounting (£8bn monthly) • 100,000 businesses use equity finance (£14.3bn in 3 years) • 250,000 businesses use family and friends Source: Finance for Small and Medium-Sized Enterprises (2004) Centre for SMEs, Warwick Business School

14. QA Issues • Practice Assurance, ethical and disciplinary codes underwrite scheme • Data currently stored by Wilmington. A file will be produced for loading onto ICAEW • Annual Practice Assurance letter includes reference to scheme • No particular review required on inspections • Principle risk is the practice straying into FSMA areas without relevant authorisation.

15. Further information… • Website For practices wanting scheme details: http://www.icaewfirms.co.uk/sme • Directory of Firms: http://www.icaewfirms.co.uk/ • Contact: clive.lewis@icaew.com