The UK's Chancellor of the Exchequer, George Osborne, and Business Secretary, Vince Cable have this week launched a green paper containing proposals designed to address the ongoing problems faced by businesses in accessing finance.

In a joint statement on the paper, which hopes to stimulate an "industry-led" recovery by addressing this issue, the two government departments stated that:

"The government recognises that access to finance is critical for businesses to survive and grow and that small and medium-sized companies face particular challenges. The current system is not adequately delivering finance to small, growing businesses that are vital to the future of the economy."

The Business Secretary and the Chancellor have stated that they want to work with business and the financial community to ensure that access to finance is not a barrier for companies looking to invest and boost the growth of the economy.

The paper, published on Monday, and entitled ‘Financing a Private Sector Recovery’, outlines a range of proposed finance options for different sized businesses, in addition to exploring where the market is failing to provide and if there is a role for government intervention. It also hopes to launch an intensive discussion on how business and the government can work together to produce a diverse, competitive and sustainable financial environment.

Vince Cable explained that:

“If we don’t anticipate and tackle finance barriers now we could face a big problem in the future. Left unchallenged, a lack of accessible finance for businesses could prevent the recovery accelerating."

He continued:

“I’ve heard the problems businesses are facing in getting bank loans up and down the country. They need innovative ways to access finance from other sources to grow our firms and economy. That’s why this green paper is so important as we look to help viable firms get the money they need.”

George Osborne went on to add that:

"The paper explores every major finance option, including more use of equity and encouraging venture capital and ‘business angels’ to invest in a wider range of businesses, and a responsible return to securitisation. The paper sets out options for the industry, such as an insolvency moratorium on companies restructuring their debt, increasing transparency in bank loan applications and fostering competition between banks and finance institutions."

The paper also addresses the success of existing government schemes, such as the Enterprise Finance Guarantee, and whether they should be improved or extended, although it stresses that industry-led solutions are likely to be the preferred solutions for market failures in the future, with government-led interventions acting as a last resort.

Comments are invited on the proposals until September 20, 2010.