* Report recommends ways to boost non-bank business finance
* Funding shortfall could reach 191 bln pounds over 5 yrs
* Pooling loans would give SMEs access to bond markets
By Kylie MacLellan
LONDON, March 16 (Reuters) - Britain should look at creating a body to bundle loans to small and medium sized businesses and sell them on to investors, a government-commissioned taskforce looking to boost alternatives to bank funding recommended on Friday.
With small businesses struggling for funding as banks, facing higher capital requirements, rein in lending, the government has been seeking to get much-needed cash flowing to help promote investment and job creation.
“Access to finance is expected to become more acute as business confidence and growth returns, whilst continuing bank deleveraging is likely to leave a significant funding shortfall,” said Legal and General chief executive Tim Breedon, who led the taskforce.
The group’s report estimated the business sector faces a funding gap of 84 billion pounds to 191 billion pounds ($132 billion to $299 billion) over the next five years, with 26 billion pounds to 59 billion pounds of that shortfall relating to smaller companies.
Public corporate bond markets are beyond the reach of most small businesses due to the upfront costs and investors’ desire to put their money into larger, more liquid issues.
Pooling a large number of loans would give small businesses access to such markets, the report said, recommending the Association of Financial Markets in Europe (AFME) look at how a single issuer could be created to aggregate lending.
Breedon’s taskforce, whose members included London Stock Exchange chief executive Xavier Rolet and HSBC’s UK chief executive Brian Robertson, received more than 100 submissions from those in the industry during its three month consultation.
Other suggestions it made were to create a single brand and business support agency to streamline to government’s “alphabet soup” of existing support programmes for business funding, drawing on international examples such as Germany’s state-owned business support agency KfW.
The growth of alternatives such as peer-to-peer lending platforms like Funding Circle, a website which allows people to lend directly to small firms in the UK, could also be boosted by direct support from government, the report said.
“We want to see innovative models like Funding Circle given the chance to thrive,” said Breedon.
Regulation of the sector, a concern raised by some in the market, will be an issue at some point, he added, but it needs to be balance with the need to not stifle innovation and choice.
“We can learn so much about what the financing landscape needs to be like from the new models available,” he said. “We need to find new ways of doing things and we can be informed by the customers of those new ways.”
$1 = 0.6382 British pounds Reporting by Kylie MacLellan; Editing by Elaine Hardcastle