Small business loans scheme slips to new low

Lending to small firms has slipped to a new low, according to the finance provider Syscap. It says that the value of loans offered under the Enterprise Finance Guarantee (EFG) scheme slumped 24 per cent to £77.8m in the three months to the end of December last year. In the previous quarter it was £102.8m.

The scheme was introduced to encourage banks to provide finance to SMEs with a turnover of less than £25m. Under the scheme the Government guarantees75 per cent of the value of lending in an individual loan to a business.

In January the scheme was widened to include firms with a turnover of up to £41m to improve take-up of the scheme, but it may have had the opposite effect, said Philip White, chief executive of Syscap. "The EFG scheme's attraction was that it targeted just those smallest companies. Throwing the doors of the scheme open to bigger companies might lead to more lending in total but less lending to the smallest companies."

Small Talk, page 50