The most significant obstacle to the growth of the SME (Small and Medium-sized Enterprises) sector in the UK economy is finance – or the lack of it. So found a recent survey by ESRC (the Economic and Social Research Council). And yet most businesses claim they are able to raise the finance they need on terms which they find satisfactory.

So what's the problem? It's the difficult cases where the rapid growth of an innovative company generates a cash requirement which doesn't fall within the normal lending criteria of the major banks, the so-called equity gap. The banks are unwilling to lend and the owners are unwilling to dilute their equity.

To whom does a company in the equity gap turn for advice? A recent study we have undertaken for Business Link Thames Valley shows that firms often do not have an independent advisor to help them with corporate finance issues. Half of the SMEs we quizzed used accountants who did not provide this help. Many looked, naturally, to their bank manager for support, but found that his hands were often tied by the bank's overall lending policy.

The most important criterion in selecting an advisor, said most firms, was independence, followed by expertise in the various types of finance and of working with SMEs. They also revealed a stronger desire for financial advice than for any other form of business support. The help they need includes:
• Determining appropriate types of finance
• Identifying sources of finance
• Preparing applications or business plan
• Approaching sources of finance
• Presenting their case
• Negotiating the best terms

Business Link Thames Valley are now planning to offer an independent service to provide companies with practical assistance in raising finance. It will be subsidised by the DTI who are part-funding similar initiatives by other Business Links around the UK. It should make a significant contribution to local prosperity if a growing firm can get the right type of finance when it most needs it.

Our research also showed that accountants in smaller practices, most of whom do not offer advice in raising finance, welcomed Business Link's proposals. They will be able to refer their clients to independent corporate finance support to complement their own services.