Enterprise Finance Guarantee scheme dwindling year-on-year

The effectiveness of the Enterprise Finance Guarantee (EFG) scheme is dwindling year-on-year, according to new figures from the British Business Bank.

The scheme, which sees the Government act as a guarantor for SME loans, is lending to fewer small businesses year-on-year since 2009.

The EFG scheme enables the Government to act as a partial guarantor on up to 75 per cent of bank loans between £1,000 and £1.2 million for SMEs that cannot offer up any assets as security.

However, just 446 companies were granted a loan through the EFG scheme in Q4 2015 at a total value of £55.7 million, compared to 2,030 SME loans drawn in Q2 2009 at a total value of £201.6 million.

Alex Littner, managing director at online finance provider, Boost Capital, believes that while last week’s Budget 2016 was positioned with small businesses at its core, the EFG scheme that serves finance-starved small firms cannot be considered a success with lending continuously declining.

“A mere 1,835 enterprises received EFG-backed loans during the whole of last year; when we consider that 99 per cent of Britain’s 5.4 million businesses are SMEs, the figures continue to prove that the liquidity lost during the 2008 economic downturn is not back to where it was,” said Littner.

Littner was surprised to hear that the EFG continued to receive further government commitment in Budget 2016 despite “no evidence it is really delivering what it set out to do”. The Government confirmed last week that the EFG scheme will be extended until 2018 at the very least.

“Disappointingly absent [from Budget 2016] was the government’s progression on the bank referral scheme, first announced in 2014, which will ensure banks will share with alternative lenders the details of small business customers they reject for lending,” added Littner.

“It needs to act more swiftly; a launch date and any further details on how it will actually work is yet to be explained.”

Date published 24 Mar 2016 | Last updated 24 Mar 2016