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Funding drought fuels failure

Posted by Andrew Mernin on February 19, 2009 5:20 PM | 

A VERY public spat between a TV chef and a bank could be a microcosm of the current experiences being endured by our army of small businesses.

He may be well-heeled, double-barreled and no doubt pretty flush from his years in front of the camera, but Antony Worrall Thompson is finding life in business just as tough as thousands of other small firms starved of funding and ultimately being forced out of existence.

Last week he popped up on the BBC Breakfast sofa to tell his sorry tale of how Lloyds TSB rejected his bid for £200,000 - a move which caused the doors of four of his six restaurants to slam firmly shut.

Tommo admits Lloyds did offer backing in return for guarantees from another of his companies, which perhaps suggests he believes his business is too risky for serious investment.

Instead he turned his back on the bank and chose to blacken the Lloyds name through public outcry at the Beeb.

Unlike the bearded caterer however, most small business leaders don't have an empire of "other companies" to fall back on and don't have the famous name to mount a public campaign against financial backers.

So where do they go from here?

This week I covered a story about an online travel directly called Urban Digger which has had a similar experience as the celebrity chef.

For almost a year we have covered the start-up phase of the firm which has received some serious backing, looks set to create numerous North East jobs and is run by two of the region's most promising young entrepreneurs - one of them, Sarah Taylor, featured in our recent Rising Stars Future Leaders supplement.

Well into 2009 we were gearing up for the final official launch which was sure to bring our business pages a glimmer of positivity amid ongoing doom and gloom.

But then, at the final hurdle, its bank, RBS, pulled out of an agreed £50,000 loan - leaving the company reeling and forcing it to delay its launch by six months.

The company has other irons on the fire and remains confident it will gain the funding it needs to bring it to market by Spring, but its experiences have been mirrored across the region.

Perhaps a more alarming story which highlights an impending funding drought for small firms is this week's news that an £8m fund set up by the Government to support small North East firms who are desperate for funding has closed due to oversubscription.

The Transitional Loan Fund has reportedly turned down applications for funds worth £5m since its launch in December.

Are you one of these unlucky businesses? Has your bank pulled the plug on loans it had previously promised you in brighter times? If so we want to hear from you either in our forum at www.nebusiness.co.uk/forum or you can email me your experiences at andrew.mernin@ncjmedia.co.uk.

In the meantime you have to wonder whether the banks and the Government are shooting themselves in the foot by rejecting the desperate calls of small firms for funding.

From acorns, big things grow. And with big things come jobs, money, foreign trade and better infrastructure.

Like the legends that circulate in music folklore about the record producers who turned down the Beatles or Elvis, perhaps the banks are turning away the Sages, Googles or Apples of the future.

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