You have had this great idea for a new widget, or can see a gap in the market for an imported product, so how easy is it to set up a new electronics business in the UK? To test the water, you could just make some in your shed or import a few shipments and sell them on Ebay, (although HM Customs and Revenue are now data mining online to try and catch informal business and get more money!) but how easy is it to then create a formal business?
The answer is not very, because every arm of government, with their allies in the banking industry, will put obstacles in your way because they do not understand industry and believe regulations are the most important thing in the world.
Let’s start with trying to get some money from a bank. If you thought consumer banking is a cartel with no real competition between a few major players, business banking is even worse. The limited number of banks who offer business banking all operate the same selection criteria and all hate electronics, which they do not understand. If you are very persuasive and have a great business plan, they will then want security and if you haven’t got a house or the spouse won’t let you use it as security, you will be stuck.
This is where the government should step in with loan guarantees to protect the bank from some of the risk inherent in new startups, which is a great idea but successive governments have never got these right. Either the banks, who are noted for their greed, try and convert all the dodgy loans and overdrafts they already have into new loans covered by the scheme, or if this is stopped, they pretend they have never heard of it because it is too much effort dealing with the bureaucracy.
You need to do your homework and find out what schemes the government currently have in operation so you can brief your bank manager about them, because even if he has heard of them, he won’t bring it up. Plus governments can’t resist tinkering and announcing changes or new schemes constantly for PR purposes- “we are doing this … to create more jobs, promote growth etc.”. The current government’s national loan guarantee scheme seems to just be a bribe to the banks to lend to established business slightly more cheaply and won’t benefit startups. To those who have shall be given, a typically Tory message. But there is an older scheme, the Enterprise Finance Guarantee that you should remind your banker about.