Small firms thrown financial lifeline
Published by Anne Marie Hughes on Sat 09 Jun 12 @ 22:14
Small businesses struggling to access funding have been given an alternative option with the introduction of new legislation this week.
Credit unions, previously restricted to providing financial services to individual members, are now be able to choose to lend to small businesses - many of which may have been unable to access funding through traditional mainstream financial service providers.
Paul Mcfarlane, head of operations at Glasgow Credit Union, the largest in the UK, believes the new legislation could help boost the country's falling business start-up rate.
He said: "The number of new businesses in Scotland has fallen by 13% over the past year, with many fledgling entrepreneurs citing access to funding as a major barrier to starting up.
"The changes in legislation mean those struggling to start-up, or those small firms who are struggling to survive due to cashflow problems, have a potential extra financial lifeline to help boost their business."
The changes in legislation also mean the previously restrictive common bond, will now be relaxed to allow credit unions to offer their services, for example to tenants of a housing association or employees of a national company, even if some tenants or employees live outside the geographical area that the credit union serves.
Credit unions will also be able to provide their savings and loans services to local unincorporated community groups, corporate businesses and social enterprises, giving them the opportunity to attract share capital.
Mcfarlane added: "In the rest of the world, credit unions are huge enterprises; in the USA more than 70million people belong to a credit union, including many small firms. Yet only 1.5% of the UK population are members of credit unions. The legislative changes will help the country's credit unions begin to emulate the success stories of their worldwide counterparts."
Each credit union will individually decide whether they will extend their membership to small businesses and other organisations.