The Comptroller and Auditor General, Mr Kieran Donnelly, recently published a report examining access to finance for small and medium-sized enterprises (SMEs) in Northern Ireland.
In Northern Ireland, small and medium-sized enterprises (SMEs) provide approximately three-quarters of all private sector jobs and turnover. Access to appropriate sources of finance is important in helping SMEs to develop and grow.
This report focuses on the progress made by Invest NI in implementing its `Access to Finance Strategy’. The strategy comprises seven funds which are mainly making investments and loans to local SMEs. The funds, which commenced in 2009, are managed by independent fund managers, and will provide total support of £181 million up to 2024 (£104 million from Invest NI and £77 million from private investors).
As well as assessing the extent of demand for finance from local SMEs, and whether this is being adequately met, the report highlights:
Commenting on the publication, Mr Donnelly said:
“The Access to Finance strategy is providing an important source of finance to local SMEs. However, it is a long term initiative, involving inherently high risk investment activity, and whilst there is potential for longer term success, sufficient evidence is not yet available to demonstrate that it is delivering value for money”.
“A number of key measures will determine the strength of performance achieved, including the financial returns realised by Invest NI, the extent of growth and wider economic benefits achieved by supported businesses, and the strategy’s contribution to developing the local risk capital industry”.
“Invest NI can take steps to help assist the future performance of funds. It should ensure that fund managers are actively and judiciously managing investments to maximise potential fund returns. It should also more clearly define what the overall strategy is expected to deliver, set aggregated targets for key areas, and identify the specific outcomes which would demonstrate that the strategy has helped develop the local venture capital industry”.
Highlighting the need to ensure the interests of small businesses are promoted and protected in enhancing access to finance, FSB NI Regional Chair, John Friel, said:
“As the Auditor has recognised, the Access to Finance strategy is providing an important source of finance for small businesses across Northern Ireland, at a time when such support is often difficult to find. Whether businesses are at the earliest stages of their development, or seeking to grow and expand their horizons, securing suitable and appropriate finance is often the critical determining factor of their long term success. Given the difficulties faced by many small businesses in accessing finance, whether through a decreased appetite for risk from traditional lenders or higher costs of alternative finance options, we would be keen to ensure the maximum availability of funds, including those offered by Invest NI."
“By its very nature, the Access to Finance strategy is a long term initiative, with funds expected to operate until July 2024, and we are keen to ensure that the fund managers are given sufficient opportunity to demonstrate the value for money within that timescale, avoiding the temptation to prefer ‘safe bets’ in order to secure quick wins. A careful balance must continue to be struck between assessing commercial risk and supporting innovation, both of which are legitimate aims for any such strategy. But we believe the most significant determining factor in assessing the long term success of this strategy will be in ensuring its availability is promoted and applications encouraged from the widest possible range of small businesses. Invest NI must continue to raise awareness of the availability of these funds, and ensure applications are as straightforward as possible, whilst recognising the need for due diligence.”