Small business, big ideas, waiting anxiously

Memset is a little computer cloud firm in Surrey with big ideas – and currently no way of making them a reality.

Its problem is simple and strikingly familiar. The company could grow its business considerably if only it could find someone to lend it the money to make a significant investment in technical infrastructure.

Kate Craig-Wood, the impressive MD, told me she has tried just about everything. When her existing bank wouldn’t give her a loan she switched to another of the high street lenders who promised they would.

When they reneged on that offer and also denied her credit, she tried one of the banks now largely owned by the taxpayer, thinking government pressure would persuade them to lend to small businesses like hers. Still no joy. The best offer she has found is a loan of £200,000 that she could only have if she promised not to actually draw down any of the funds!

Government initiatives

Despite all the talk from government about trying to get the banks to free up credit, none of their initiatives has yet helped Memset or hundreds of firms like them.

Project Merlin has not worked, and even the Enterprise Finance Guarantee hasn’t produced any lending Craig-Wood can access. So you can forgive her for being pretty sceptical about the latest ideas the Treasury has come up with to try to get the credit flowing.

Her concern is simple. Craig-Wood thinks that the big banks have become so risk averse that no government scheme which still hinges on bank lending can be made to work.

Whether the government promises to underwrite business loans or whether it tries to get the banks to participate in a bond market for SMEs, the result will still be the same. The government has to find a way to get credit to the companies who need it without going through the traditional lenders.

British entrepreneurs are waiting to hear some fresh “blue sky” thinking from the chancellor about how to get lending going again, or companies like Memset won’t be able to build a big enough cloud.