The Enterprise Finance (not so) Guarantee
June 7, 20112009 saw the arrival of the Enterprise Finance Guarantee Scheme (EFG), an initiative in which the government would assist lenders in providing loans to SMEs with risky business plans. The scheme itself will continue through to 2015, providing up to £600m in additional lending to around 6000 SMEs in 2011 and 2012, with an added prospect, if needed, of a total of £2 billion over the next 4 years.
While this may be the key to solving a lot of problems for you budding entrepreneurs out there, I wouldn’t celebrate just yet. Research recently carried out by the specialist lender Aldermore, has shown an 11% decrease in the value of loans through the initiative from £103m (Q4, 2010) to £92m, all in the space of just 3 months. Furthermore, the bank has gone on to say that overall lending under the EFG has dropped by a troubling 36% since its launch in 2009.
While this may cause worry, it may not be as bad as you think. So long as the scheme is still active, SMEs will continue to benefit from a higher success rate of funding from banks; but if the figures continue to decline, SMEs will face a steady increase in difficulty.
For those of you who are finalising your business plans, try to go that extra mile and make it as airtight as possible (we’d also be happy to help), so you’ll be able to walk out of the bank with a smile on your face (fingers crossed!).
