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SMEs: have you ever got your hands on government cash?

By Hamish Champ
Posted 16 November 2012

One can’t chide the government for putting up investment funds for small businesses.

After all, small firms are likely to be part and parcel of what it will take to get the UK economy back on its feet.

But such companies obviously need access to seed funding in order to get off the ground, and once they are on track such investment can generate significant returns for investors.

So news that business minister Michael Fallon has announced an Enterprise Capital Fund to plough money into SMEs involved in science, technology and engineering sectors can only be a good thing.

In this instance there is a total of £40m of funds available, with £25m coming from the taxpayer and £15m from private investors.

This sounds fine, but I do wonder though how many small firms manage to avail themselves of such funding and what is involved in getting hold of the cash they want.

I imagine many have to jump through hoops, but then such hoops are there for a reason; failure rates among start-ups in the UK are high.

According to The Start Up Donut, a website for, er, start ups, around half of new businesses fail in their first year of operation, and 90% don’t make it through their second 12 months of trading.

The website goes on to highlight what it sees as the reasons for start-up businesses going under.

In no particular order these include:

  • No real demand
  • No business plan
  • No plan B, C or D
  • Lack of funds
  • Growing too fast
  • Wrong attitude

Sobering stuff.

Fallon meanwhile told those gathered at today’s launch of the Longwall thing that in addition to helping small businesses find the finance they needed through the fund he was also “taking action” to persuade investors to back SMEs; no doubt this will involve tax incentives.

I still can’t help wondering who actually gets the money he’s offering and how it transforms the future of those applying for it.

If you have experience of this sort of thing, do let me know

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