It's all about finance: Credit must go where it is due

Is lack of finance the reason why small companies are struggling to grow? Or is that merely an excuse for overcaution, weak management and unviable propositions?

I spend much of my working life reading business plans, analysing projects that need capital, investing in smaller companies and discussing the challenges they face.

Unquestionably, the flow of sound deals I see has declined since the financial crisis in 2008. I suspect that much of the reduction is because economic conditions have deteriorated, and so owners feel less confident about raising equity or borrowing money.

But it is also certain that bank credit has got harder to obtain, and is more expensive than it was. The interest margin that banks charge has risen steeply; the security they require for loans has increased very materially; the amortisation of any facility is much more onerous; and fees are bigger.

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