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Govt brings forward move to help SMEs find equity finance

by: IFAonline
  • 01/08/2011
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Financial secretary to the Treasury, Mark Hoban MP, has announced that two deregulatory amendments to the EU Prospectus Directive have been brought into effect a year early by the UK to help small businesses access equity finance more cheaply and effectively.

The new requirements come into law on 31 July 2011, allowing businesses to take advantage of the measures from today.

SMEs will now be able to raise equity finance of up to €5m, doubled from €2.5m, before a costly prospectus must be produced.

They will also be able to target a larger pool of investors, up to 150 from 100.

The government said the move will lift a significant number of small companies from the obligation to issue a prospectus, which it said will make accessing equity finance more efficient and save UK SMEs around £12m per year.

Implementing the amendments a year early means fewer small issuers are caught by the prospectus regime. 

The government has been criticised for not doing enough to help small businesses through the difficult economic conditions when banks have been unwilling to lend.

Hoban said: “Reducing the regulatory burdens faced by business is vital in making the UK the best place in Europe to start, finance and grow a company.

“In order to play their part in the wider economic recovery, small businesses have to be able to access the finance they need – that includes making it easier for such businesses to tap into capital markets.”

John Walker, National Chairman of Federation of Small Businesses, welcomed the move.

He said: “More small firms should look at equity finance as an alternative route to accessing credit, and these simple changes will help firms who are looking to grow and invest.

“Extending the number of investors and increasing the prospectus value will help more small businesses access equity finance and show there are more options than just going to the bank for credit.”

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