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Government introduces deregulatory measures to help SMEs access equity financing

Posted on 03 August 2011

The 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.

By bringing these measures into force now, the Government is demonstrating its commitment to helping small UK businesses access the finance they need, in an announcement welcomed by the Federation of Small Businesses. The new requirements come into law on 31 July 2011, allowing businesses to take advantage of the measures from 1 August 2011.

Implementing the amendments a year early means that fewer small issuers are caught by the prospectus regime. SMEs will now be able to raise equity finance up to €5 million (doubled from €2.5 million) before a costly prospectus must be produced. They will also be able to target a larger pool of investors (up to 150 investors, from 100). Lifting a significant number of small companies outside of the obligations to issue a prospectus will make accessing equity finance more efficient and save UK SMEs around £12 million per year.

Mr Hoban said:

“I’m delighted to announce that the UK is taking the lead in Europe by introducing these deregulatory measures early, saving UK SMEs £12 million per year. 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, Federation of Small Businesses, said:

“We welcome the fact that the Government is leading the way in Europe by making it easier for small business to access finance. 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. What’s important is that small businesses are aware of the alternative routes to finance.”