The implementation in the EU of the “Basel III” rules on capital requirements for banks is fast becoming a source of concern for SMBs, as they believe it will result in considerably higher trade financing costs and tighter credit conditions for small and medium-sized businesses as well as start-ups.

The irony of this regulation, devised to safeguard consumers is that it could do the opposite for one of the most vulnerable sections of the business community made all the more unstable by the current economic conditions in Europe.

Looking at what SMBs said were their biggest challenges for the next 6 months in Sage’s most recent Business Index – rising costs, uncertainty in the local economic market and reduced cashflow were the top three concerns. Add to these the inability for a small business to access credit and we could be looking at the “perfect financial storm”. Some might say we already are. But we know from this and past Sage Indices that SMBS are a hardy lot which have already weathered a number of years of harsh trading environments.

With high levels of unemployment across Europe, the contribution of SMBs cannot be underestimated and anything that affects a business from being able to invest and grow could ultimately cause more damage than good.

Meanwhile, the UK Government has unveiled a £100bn package “funding for lending” scheme. It’s aimed at helping banks increase lending levels against the backdrop of the worsening crisis in the eurozone. The new scheme could support up to £80bn of new loans many of which are earmarked for small businesses looking to expand.

The Bank of England suggested the funding for lending scheme could be in place within a few weeks. If this works in the UK, perhaps it would be wise for the regulators to revise the way banks across Europe are allowed to lend to SMBs to ensure a level playing field and support trading with companies overseas.

With the deadline for Basel III looming and threatening to add to the burden of new regulation for SMBs, it’s important government tailor these for smaller organisations in order to avoid unhelpful and unwelcome consequences.

The World Economic Forum Annual Meeting in Davos has wrapped up and it’s clear that money was uppermost on European governments’ minds – be it the lack of or the need to supply the IMF with more funds to avoid a full scale fiscal subsidence across the Eurozone.

On a positive, the unlimited liquidity provided by the European Central Bank’s three-year long term refinancing operation (LTRO) has reduced pressure on European banks and is widely believed to be helping confidence return.

And it needs to. With the World Economic Forum’s Global Confidence Index indicating confidence in global cooperation has dropped it’s more important than ever that government and business communities work together to deliver this much needed growth.

Lee Howell, Managing Director at the World Economic Forum responsible for the Annual Meeting and the Forum’s Global Risks Report 2012 said: “The latest survey suggests that company leaders and public officials will urgently want to focus in Davos and beyond on job generation and spurring growth.” He added: “Low confidence in governance and high concern about disruption are the making of a slow-burning fuse.”

These are two areas highlighted by the 2011 Sage Business Index. In this report, a significant 78 percent of small businesses polled felt that their governments did not provide sufficient advice and support. At the same time the findings indicated that businesses want to focus on the future with investments plans – a third of which saying they intended to invest in sales and marketing. And while none were planning on reducing the workforce, they were not committing to recruiting.

Meanwhile according to a Bloomberg Global Poll, 48 percent of respondents predicted the U.S. will be among the world’s best-performing markets this year compared with 18 percent who are positive about world growth.

It seems teamwork between industry and governments will hold the key to recovery and it has long had the full support of small businesses worldwide.

On January 19th, the European Parliament approved a revision to the Waste Electric and Electronic Equipment (WEEE) Direction that means smaller retailers will now be obliged to collect small waste electric and electronic goods from consumers at no cost and without any requirement on the latter to buy a new product of the same kind in the shop.

The clause applies only to retailers with more than 400 square meters of sales area, for small WEEE items and unless an assessment shows that alternative existing collection schemes are likely to be at least as effective.

One European Association – UEAPME the European craft and SME employers’ organisation has already responded to the vote to say that while this is likely to exclude many micro and small retailers from collection obligations, other SMBs will nonetheless be clearly affected.

Over half of the SMBs polled in 2011 for the Sage Business Index about “The role of Government” put bureaucracy and legislation as the least favourable aspect of doing business in their country.

The general opinion is that restrictive legislation inhibits small business growth and certainly there has been a lot of hand wringing over the past couple of years about Europe’s productivity challenge.

Regulation that protects health, safety or the environment is welcome but the focus must be on those rules that make sense, add value and have an overall positive impact. In an already unforgiving trading environment – this revision of the WEEE directive feels like it will be prove a heavy responsibility in more ways than one.

Europe as a whole might avoid a recession this year and there were reasons to be more upbeat about prospects for the region, Business Day quoted International Monetary Fund (IMF) head Christine Lagarde as saying. She went on to declare that the Eurozone comprised of very different economies cruising at different growth rates meaning that while some areas may suffer more than others, an all-out EU recession was unlikely.

And with the practice of more effective bailout mechanisms – conditions have indeed much improved. In actual fact reports coming out of the European Central Bank state that financial institutions across the continent have stored record levels of funds in order to meet the terms of new regulations.

So, taxpayers are safe from having to put their hands in their pockets again in the event of another banking industry collapse – but what about these economies’ growth engines? The all important legion of employers – the Small Business (SMB) Community?

One thing is for sure, SMBs across Europe are pretty much over the ongoing pessimism surrounding the Eurozone crisis and news agenda. In this sense, they are likely to welcome Christine Lagarde’s comments. The general mood, it would appear is shifting from one of recession to one of moderate growth ambitions .

But even moderate growth requires a certain amount of investment and with financial institutions having to bank more capital there will inevitably be less to go around. We know from the Sage Business Index, that SMBs’ biggest gripe revolves around access to finance.

Perhaps it’s time for big brother to step in again and in the same way the Government pushed for regulations such as Basel III – which requires banks to hold more capital, it could also press for less rigidity in lending to SMBs.

Flexibility of this kind will enable SMBs to prepare a targeted cashflow solution that will help set them up for growth, albeit moderate in 2012. And that is all they are asking for.