IDEAS home Printed from https://ideas.repec.org/a/sae/loceco/v29y2014i1-2p9-21.html
   My bibliography  Save this article

Local Enterprise Agency loan funds and investment readiness in UK small firms

Author

Listed:
  • David Irwin
  • Steve Pattinson
  • Jonathan M Scott

Abstract

We considered (i) whether loan funds managed by Local Enterprise Agencies (LEAs) in England addressed the finance gap faced by new and small firms that are unable to raise investment capital from other sources, and (ii) whether LEA loan funds offered value-for-money and sustainability. Utilising realistic evaluation and data provided by LEAs, we found that funds had a high conversion rate of applications to loans, presumably because most referrals came from advisers and so propositions unlikely to be supported had already been weeded out, and due to high repayment rates. The level of demand suggested that knowledge of the availability of loans from these sources was still low, but that loans from LEAs were genuinely additional for small firms that would not otherwise have been able to raise the required finance from other sources, indeed in many cases leveraging commercially sourced funds. While LEA loan funds were becoming more efficient, they were not – and were unlikely to become – wholly sustainable. The high conversion rate (and low default rate) suggested that the real need for prospective entrepreneurs is effective advice and support to improve their ‘investment readiness’ and thus assist in unlocking the necessary financial support.

Suggested Citation

  • David Irwin & Steve Pattinson & Jonathan M Scott, 2014. "Local Enterprise Agency loan funds and investment readiness in UK small firms," Local Economy, London South Bank University, vol. 29(1-2), pages 9-21, February.
  • Handle: RePEc:sae:loceco:v:29:y:2014:i:1-2:p:9-21
    DOI: 10.1177/0269094213519412
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0269094213519412
    Download Restriction: no

    File URL: https://libkey.io/10.1177/0269094213519412?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Oskari Lehtonen & Tom Lahti, 2009. "The role of advisors in the venture capital investment process," Venture Capital, Taylor & Francis Journals, vol. 11(3), pages 229-254, February.
    2. Jonathan M Scott & David Irwin, 2009. "Discouraged Advisees? The Influence of Gender, Ethnicity, and Education in the Use of Advice and Finance by UK SMEs," Environment and Planning C, , vol. 27(2), pages 230-245, April.
    3. Allan Riding & Judith Madill & George Haines, 2007. "Incrementality of SME Loan Guarantees," Small Business Economics, Springer, vol. 29(1), pages 47-61, June.
    4. Ben R. Craig & William E. Jackson & James B. Thomson, 2007. "Does government intervention in the small-firm credit market help economic performance?," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Aug.
    5. Colin Mason & Richard Harrison, 2001. "'Investment Readiness': A Critique of Government Proposals to Increase the Demand for Venture Capital," Regional Studies, Taylor & Francis Journals, vol. 35(7), pages 663-668.
    6. Colin Wren, 2002. "Evaluating the effect of soft business support upon small firm performance," Oxford Economic Papers, Oxford University Press, vol. 54(2), pages 334-365, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anoosheh Rostamkalaei & Mark Freel, 2017. "Business advice and lending in small firms," Environment and Planning C, , vol. 35(3), pages 537-555, May.
    2. Joan-Lluis Capelleras & Ignacio Contín-Pilart & Martin Larraza-Kintana, 2011. "Publicly Funded Prestart Support for New Firms: Who Demands it and How it Affects Their Employment Growth," Environment and Planning C, , vol. 29(5), pages 821-847, October.
    3. Mojca Svetek, 2023. "The Role of Entrepreneurs’ Perceived Competence and Cooperativeness in Early-Stage Financing," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2047-2076, November.
    4. Katarzyna Łobacz & Paweł Głodek & Edward Stawasz & Piotr Niedzielski, 2016. "Utilisation of Business Advice in Small Innovative Firms: the Role of Trust and Tacit Knowledge," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 4(2), pages 117-138.
    5. Kevin Mole & David North & Robert Baldock, 2017. "Which SMEs seek external support? Business characteristics, management behaviour and external influences in a contingency approach," Environment and Planning C, , vol. 35(3), pages 476-499, May.
    6. Kevin Mole & Joan-Lluís Capelleras, 2018. "Take-up and variation of advice for new firm founders in different local contexts," Environment and Planning C, , vol. 36(1), pages 3-27, February.
    7. Kevin Mole & Robert Baldock & David North, 2013. "Who Takes Advice? Firm Size Threshold, Competence, Concerns and Informality in a Contingency Approach," Research Papers 0009, Enterprise Research Centre.
    8. Capelleras, Joan-Lluis & Mole, Kevin F., 2012. "How ‘buzz’ reduces uncertainty for new firm founders," MPRA Paper 38170, University Library of Munich, Germany.
    9. Cowling, Marc & Ughetto, Elisa & Lee, Neil, 2018. "The innovation debt penalty: Cost of debt, loan default, and the effects of a public loan guarantee on high-tech firms," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 166-176.
    10. Kanayo K. Ogujiuba & Maria Eggink & Ebenezer Olamide, 2023. "Interaction and Main Effects of Finance Support and Other Business Support Services on the Entrepreneurial Ecosystem: A Case Study of the Mpumalanga Province, South Africa," Economies, MDPI, vol. 11(6), pages 1-23, May.
    11. Fabio Bertoni & María Ferrer & José Martí, 2013. "The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms," Small Business Economics, Springer, vol. 40(3), pages 607-633, April.
    12. Steve Johnson & Don J Webber & Wayne Thomas, 2007. "Which SMEs Use External Business Advice? A Multivariate Subregional Study," Environment and Planning A, , vol. 39(8), pages 1981-1997, August.
    13. Kevin F Mole & George Bramley, 2006. "Making Policy Choices in Nonfinancial Business Support: An International Comparison," Environment and Planning C, , vol. 24(6), pages 885-908, December.
    14. Caliendo, Marco & Künn, Steffen & Weißenberger, Martin, 2016. "Personality traits and the evaluation of start-up subsidies," European Economic Review, Elsevier, vol. 86(C), pages 87-108.
    15. Juan-Pierrà Bruwer, 2018. "Do Internal Control Activities Adversely Influence the Profitability and Solvency of South African SMMEs?," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 49-58.
    16. Rotger, Gabriel Pons & Gørtz, Mette & Storey, David J., 2012. "Assessing the effectiveness of guided preparation for new venture creation and performance: Theory and practice," Journal of Business Venturing, Elsevier, vol. 27(4), pages 506-521.
    17. Marta Gancarczyk, 2010. "System wsparcia dla przedsiębiorców - doświadczenia brytyjskie," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5-6, pages 41-60.
    18. Iman Seoudi & Salma Mahmoud, 2016. "Public Policy For Venture Capital: A Comparative Study Of Emirates, Saudi Arabia And Egypt," Review of Business and Finance Studies, The Institute for Business and Finance Research, vol. 7(1), pages 19-42.
    19. Sun Ho Lee & Eung-Soon Lim & Jinyoung Hwang, 2017. "Do credit guarantees for small and medium enterprises mitigate the business cycle? Evidence from Korea," Empirical Economics, Springer, vol. 52(4), pages 1367-1378, June.
    20. Anita Quas & Diego D’Adda, 2018. "High-tech entrepreneurial ventures seeking external equity: whether, when, where… and why not?," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(3), pages 311-334, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:loceco:v:29:y:2014:i:1-2:p:9-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.lsbu.ac.uk/index.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.