Finances fall short for firms in deprived areas

Firms in deprived areas of the UK are likely to receive lower loans than their counterparts in more affluent regions, according to research into small business financing by the Bank of England.

The report reveals that small firms are having less trouble accessing loans and overdrafts than ever before and in fact those in so-called developing areas are provided with a higher than average number of loans from banks, business angels and venture capitalists.

However, the value of these loans is significantly lower than the national average, creating a growing gap between rich and poor areas.

Figures covering June 2002 show that the average term loan to firms in deprived areas was £37,515, up 5.2% on the previous year, compared with £40,742 going to firms in other areas, an increase of 11.5% in the same period.

The Bank of England concluded that the lower value of businesses, compared to an equivalent business in a richer area, was the main reason for the discrepancy. The report also found that firms in developing areas were more likely to have overdrafts or bad debts.

The Government is looking to redress the balance by giving firms in more deprived areas favourable tax conditions and setting up funds that give preferential rate loans to start-ups with promising plans.

The Access to Finance programme is another scheme intended to help. It will provide assistance to companies to make them ‘finance ready’. Later in the year this will be complemented by the creation by the LDA of new loan funds for SMEs experiencing difficulty in accessing finance from the commercial sector.

For more information on where to find finance for all sorts of businesses, see our Loans and Grants sections.

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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