Scottish Investment Bank Financial Readiness Service Strategic Review: Final report to Scottish Enterprise

This report summarises the findings and recommendations from a Strategic Review of the Scottish Investment Bank (SIB) Financial Readiness Service (FRS). FRS delivers a range of advisory support through specialists and grants for third party support to businesses to equip clients to better assimilate and present the information required for potential funders. Support is provided to all types of business (growing, seeking to re-finance, facing financial challenges etc). The report covers activity between April 2014 and March 2017 and considers the current rationale for support, effectiveness and efficiency, and economic benefits.

The research involved a review of management information on the delivery of the FRS and consultations with stakeholders, FRS executives, and grant assisted and non-grant assisted business clients of FRS.

The research found that financial readiness support addresses information failures which prevent businesses from optimally presenting their case for securing finance to meet the requirements of a range of potential funders. The FRS advisory service in general is a low to medium intensity intervention. FRS client feedback shows it demonstrates a high level of additionality in progressing businesses towards applying for finance, but a lower level of additionality in successful outcomes (raising finance), consistent with a service that is essentially facilitative in nature. The FRS Grant is a medium to high intensity intervention and client feedback demonstrates low additionality in the decision to proceed with raising finance. The grant and the third-party services they purchase are associated with substantial additionality in the success of the outcome of applications although around 30% of recipients surveyed would have engaged the same third-party support without the grant. Evidence demonstrates high levels of satisfaction with the service received from the FRS Team, particularly in relation to responsiveness and knowledge. Overall, the review concludes that FRS in isolation, and with its present level of resourcing, is not in a position to effectively meet the divergent aspirations of its stakeholders to service the broad base of Scottish SMEs. It suggests that there is a need to revisit the rationale for the provision of finance-raising information and support by the public sector in general, and SE in particular, giving full consideration of the policy and intervention environment within which FRS will be delivered, and complementary sources of advice and support provided by others.

Recommendations include: The rationale for and scope of FRS should be set taking account of the involvement of other organisations and resources supporting financial education. Whole of market education, information and support should be addressed on a coordinated basis alongside other providers. The specialised resources within SIB FRS Team should be targeted on the segments of the SME base. Quantified objectives should be set on the basis of the appraised need of the target market and the scale and balance of FRS resources should be modulated to be compatible with the objectives set. Low value grants, which have been progressively reduced in the period of the Review, should be discontinued; consideration should be given to increasing the intervention rate and supporting cash flow for start-up and smaller businesses where greater additionality can be expected to accrue.