Small firms’ loan scheme 'making a difference'

Lord Mandelson, the Business Secretary, has said that more than £1 million worth of loans are being made each day to small businesses as a result of a government guarantee scheme.

Addressing an audience in Cumbria, Lord Mandelson defended the Enterprise Finance Guarantee scheme, which was launched five weeks ago to support small firms that are facing short-term difficulties in raising funds.

Some 400 loans, worth more than £40 million, have already been offered, the minister said, and are being processed.

The Enterprise Finance Guarantee is delivered through banks and other lenders, and the government’s aim is provide an extra £1.3 billion of lending to businesses up to the end of March 2010.

Under the scheme, the government guarantees 75 per cent on individual loans of up to £1 million to businesses with annual turnover of up to £25m.

The guarantee can be used to support new loans, refinance existing loans or to convert part or all of an existing overdraft into a loan to release capital.

Lord Mandelson said: “These figures show the Enterprise Finance Guarantee is already making a difference to businesses. This targeted support is already helping hundreds of firms which would not have been able to secure finance without a government guarantee.

“Inevitably it takes time for schemes to take effect but the amount already lent, in only a matter of weeks, is good news for business. We will continue to work with banks to ensure individual branches are offering the guarantee and will continue to promote the scheme to small businesses across the country.”

The Minister went on, however, to emphasise that the scheme was not a government grant or bail-out, and was targeted at fundamentally viable businesses which may be struggling in the short term but which ultimately will be able to repay their loans.

Business groups have been critical of the lack of urgency with which banks have been adopting and implementing the scheme.

Another concern voiced by some business organisations is that, under the scheme, banks are allowed to ask firms for collateral covering the full amount of the loan.

Stephen Alambritis of the Federation of Small Businesses said: “With the government guarantee the credit line should be as near a grant as can be. The banks should show their commitment by being more accommodating.”

There are 23 lenders registered to offer the Enterprise Finance Guarantee scheme. They are: Airdrie Savings Bank, Bank of Ireland (NI only), Bank of Scotland, Barclays, Business Enterprise Fund, Business Finance Solutions, Clydesdale Bank, The Co-operative Bank, DSL Business Finance, GLE oneLondon, HSBC, Lloyds TSB, NatWest, NEL Fund Managers, Northern Bank (NI only), The Royal Bank of Scotland, State Securities, South West Investment Group, Triodos Bank, UK Steel Enterprises, Ulster Bank (NI Only), Whiteaway Laidlaw Bank, and Yorkshire Bank.