Firms need longer-term funding support
The study said that while bank loans have helped support medium sized businesses, firms have little to choose from when looking for loans that span more than five years.
CPI and BDO proposed creating a new funding vehicle in the Long Term Lending Trust, which would offer tax incentives to investors willing to commit to long-term debt, costing the government £310m a year.
Another suggestion was to amend the Enterprise Finance Guarantee, a loan guarantee to lenders which currently supports bank loans of up to £1.2m to MSBs, so it would incentivise longer-term borrowing.
John Cridland, CBI director-general, said: “Building up a British ‘mittelstand’ of successful medium-sized businesses is mission critical to our economic future. With little recognition, these firms quietly toil away, creating jobs in communities and boosting growth in every corner of the nation.
“A key part of unlocking their enormous potential is for the government to fix the funding ladder, filling in the gaps in supply of long-term finance that the UK’s brightest growing firms need to succeed.
“Incentivising savers to invest in our businesses for the long-run is a win win. It offers them attractive, alternative investment packages, while helping propel medium-sized businesses along their growth path, boosting the economy as a whole, and enhancing productivity.”
John Gilligan, partner at BDO UK, added: “Making the most of the UK mid-market is fundamental to creating a balanced and sustainable UK economy. But the UK lacks diversity in long term funding sources – particularly for mid-sized companies.
“We’re not trying to reinvent the wheel. Instead we’re suggesting an innovative adaptation of existing distribution channels. This is designed to allow new entrants to start up and flourish alongside current funding sources.
“The proposal also gives the people of Britain the opportunity to directly invest in long-term loan portfolios to the middle market in a regulated environment. Savers will have a new asset class to invest in and companies will be able to access the more patient capital that they tell us they need to grow.”