ABSTRACT
The subject of finance for small firms has been vigorously debated for many years. The Macmillan Committee, reporting in 1931, argued that small companies had particular difficulty obtaining medium term finance in relatively small quantities. The Bolton Committee, 40 years later, in its review of small firms, devoted more space to the problems of finance than to any other single topic. It felt that despite the valu able work of the Industrial and Commercial Finance Corporation (ICFC), which was established to close the so-called ‘Macmillan Gap’, small firms continued to encounter genuine difficulties in obtaining finance from external sources, compared with larger enterprises. These difficulties were due to the extra cost to the banks of lending to small companies — the high cost of administration relative to the sums in volved, and the higher risks of default on loans.
