The government has said that it is signing off £30m of loans each week as part of its new £1.3bn small business loans guarantee scheme, the Enterprise Finance Guarantee. (Find out more about the scheme in our guide here.)
The news comes in response to criticism from business groups saying too few firms were aware of the scheme, and that most of those who had applied were rejected.
However, according to an unnamed government source, this may be because one bank is apparently putting forward a far higher number of small businesses for the scheme than the other banks, when actually it should be handling the businesses itself. The name of the bank has not been disclosed.
The scheme is aimed at businesses with sales of up to £25m who are considered too high risk by banks. A third of businesses who’ve applied for the Enterprise Finance Guarantee had no collateral to support their application, and the rest didn’t have sufficient assets to use as security.
The government source explained that the scheme is not intended as a substitute for commercial lending, but is precisely to support these riskier businesses. The scheme was not meant to help all businesses affected by the recession, but “it is on track to do what it’s meant to do.”
In addition to the scheme, one government source said that legally-binding agreements signed with Royal Bank of Scotland and Lloyds will release £27bn in additional lending to the UK this year, with £6bn specifically for small and medium-sized businesses.
“This will be a very significant source of funds for smaller firms,” said Baroness Shriti Vadera, the small business minister. She pointed out that the total stock of lending to SMEs was £54bn.
There’s an interesting opinion piece on the scheme in today’s Telegraph, in the business section, from Richard Tyler. He criticises the scheme and says that bank lending could be preferable for small businesses looking for financial support.