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Entrepreneurs are leading the way out of recession

The recession is spurring entrepreneurs to look towards new opportunities as banks report new businesses are setting up at the rate of about 50,000 a month in the UK.

These new ventures are following the example of some big corporates like Sainsbury’s supermarkets and Marston’s Breweries that are raising cash to fund expansion by rights issues.

Some of the biggest global names like Coke and Hewlett-Packard launched in a recession and many of the new breed of business people see surviving the recession as management of change and adapting their businesses to fill holes left by the other traders who have failed to weather the financial storm.

These smaller, leaner businesses have the ability to react to changing economic factors quicker than big corporates and can zone in on niche markets.

According to the British Bankers Association, more than 48,000 new businesses opened accounts with the major banks in April – following 53,000 in March and 45,000 in February.

Lending to small businesses by high street banks was up £287 million in April, with overdraft borrowing up £20 million.

Bankers say small business lending is more or less at the same pace as before the recession and they are turning away prospective borrowers because loan applications are soaring.

BBA statistics director David Dooks said: “The high street banks’ support for the small business sector continues to rise.

“The net increase of £287m in April’s lending was consistent with the trend in recent months and the number of new banking relationships shows that the start-up rate is holding up, despite the economic environment.

“Business liquidity improved as deposits saw another monthly rise, above the increase in overdraft balances.”

Government figures show the bank lending the most through the Enterprise Finance Scheme (EFG) is Barclays that has agreed 40% or £60 million of the £149 million in loans issued so far.

Under the EFG, the government underwrites 75% of the business loan.

Businesses can apply to the scheme through 26 lenders.

About £1.3 billion is available to small businesses borrowing until March 31, 2010.

"Enterprise Finance Guarantee covers a key gap in the market - you can borrow between £1,000 and £1m, enabling you to match your borrowing requirements exactly to your business plan," said Stuart Stocks, Relationship Director for Barclays Commercial Bank in Manchester.

"You can choose a term up to 10 years, enabling you to select the optimum level of repayments, providing the term of the loan does not exceed the life of the asset purchased."

To back up the BBA figures, insurer RSA has warned firms that they could miss out on business by being too cautious in the recession.

A study by RSA and forecasting group Future Foundation found that 63% of companies surveyed thought that business conservatism would lead to missed financial opportunities.

The research also revealed that risk taking was once exemplified by entrepreneurs such as Sir Alan Sugar and Richard Branson, but due to the economic crisis is now associated with figures such as Sir Fred Goodwin, the former Royal Bank of Scotland chief executive. 

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