Qualified accountants providing a critical service to small businesses now have an opportunity to offer kite-marked financial advice to their clients with the minimum of red tape or expense following an initiative announced by the government's Improving Access to Non-Bank Debt Task Force.

Speaking of the initiative, and reiterating the government’s support for SMEs, Mark Prisk, Minister of State for Business and Enterprise, said:

‘It is incredibly important SMEs are able to access finance, particularly when the supply of credit is constrained. For businesses, a source of trustworthy, independent financial advice to guide them through the complexities of bank and non-bank finance and help them identify the most appropriate form of finance, is hugely valuable. This industry-led solution is a welcome response to a longstanding challenge: I believe that a business finance advice scheme provides businesses with the confidence to seek timely, sound advice. I want to encourage accountants and advisors to take part in this initiative, and would encourage businesses to take every opportunity to get sound, expert advice. I hope as many suitable advisors as possible take part.’

There is currently no recognised source of business finance advice for SMEs; to guide them through the complexities of bank and non-bank finance; to help them secure access to the most appropriate type of finance, to guide them on the key questions they need to consider and how they can access appropriate finance and support.

Improving access to non-bank debt task force
The Improving Access to Non-Bank Debt Task Force report chaired by Tim Breedon, CEO of Legal and General, championed sustainable finance for business. One element looked at non bank lending and advice. This has been headed by Dame Helen Alexander, deputy president of the CBI, and looked at the best means for providing this advice. ACCA has supported this initiative and has said that this should also ensure that SMEs are educated and equipped to be able to identify and access appropriate sources of finance.

As a result of the review – which concluded that accountants are the main source of information for the vast majority of SMEs – ACCA, ICAEW and ICAS have agreed to work together to create a shared scheme specifically for those qualified accountants that offer advice on finance for smaller businesses.

This means that qualified accountants will be able to offer the new Business Finance Advice service. The intention is to create a ‘kitemark’ scheme from January 2013 for the provision of business finance advice covering a full range of financing options. Businesses will then seek out those accountancy firms that provide this independent advice, incentivising those firms to offer a broader range of services to smaller business clients.

Given that the qualified finance professionals belong to reputable professional accountancy bodies, the kitemark – along with the reassurance that it will give potential clients – will be achievable at minimal cost or bureaucracy to enable accountants to keep ‘on costs’ to businesses to a minimum.

What you will be able to offer
The key aim of the new advice service is to educate businesses so that they are equipped to ask the right questions when it comes to accessing finance. There are already too many instances of entrepreneurs funding their business through the use of credit cards, which cannot be sustainable, given the high rate of interest such arrangements accrue.

Business Finance Advisers will be expected to specialise in four key areas:

Bank loans and overdrafts
In the area of bank loans and overdrafts the advice will centre on how businesses can ensure they have the best chance of getting loans or overdraft facilities and of how to ensure that they do not incur excessive charges when accessing these forms of financing.

The importance of business planning
This will be underpinned by the importance of business planning – and the role here will be for advisers to ensure that specific businesses or individuals are accessing the most appropriate finance deals to meet their needs. These will include exploring non bank financing, such as peer to peer lending, which is becoming an increasingly important source of finance for SMEs.

Business owners need to understand how to manage trade credit to their advantage. They also need to be advised on the potential of using bond markets and options – many of which will be overlooked by hard pressed SMEs who are fighting for survival or focusing on the first signs of economic recovery.

Start-up funding and equity issues
The final pillars will focus on business start-up funding and equity – a critical issue since many first time entrepreneurs will have minimal experience in these areas and will need considerable guidance and support in the early days of their fledgling enterprises. Newcomers to business development will have the reassurance that by using accredited advisers they will have the best possible support in starting and growing their business.

Finally, these business finance advisers will need to consider any future investment opportunities they will offer and how SMEs might finance activities in the export market.

With more than 60,000 members working in or for SMEs ACCA has a keen understanding of the pressures and opportunities within the sector. ACCA already works to raise awareness of SME finance issues by regularly working in partnership with Barclays Bank to provide financial advice and support to the small business sector.

Look out for further information on how you can become a business finance adviser on our website from Thursday 5 April and in the April issue of In Practice.