Future of Small Firms Loans Guarantee scheme reviewed

A business pressure group says the benefits of Teresa Graham's review, on the future of the Small Firms Loans Guarantee (SFLG) scheme, are being undermined by her recommendation that businesses older than three years should not be eligible for the scheme.

The Forum of Private Business Chief Executive Nick Goulding said while he welcomed some aspects of the Graham Review he was shocked to see the recommendation to exclude established firms from the scheme.

"We are amazed by this recommendation - on which there was no consultation with business lobby groups,' he said. "The SFLG scheme exists to bridge the gap where a business has a viable plan but inadequate funding and collateral. Excluding more established businesses means that the vast majority of firms will no longer be eligible for this vital scheme. This is ludicrous as a huge number of businesses are now going to be unable to expand."

Mr Goulding said he is surprised FPB was not consulted, on the proposal to remove older businesses from the scheme, as FPB is one of the most established authorities on the relationship between banks and small businesses.

"For 19 years, FPB has monitored the relationship between small businesses and their banks,' he said. "Next month we will be launching our ninth biennial bank report (see notes to editors) which provides a respected and authoritative insight into, among other areas, the borrowing and funding requirements of small firms."

FPB member Khalid Javid, a Glasgow-based accountant, slammed the recommendation to limit the SFLG scheme to less established firms.

"A client of mine, who has run a fruit and veg shop for ten years, is presently applying for the SFLG scheme,' he said. " It needs the cash to kick the business on and expects to use the money to increase its staff from six to 15. It is absurd to scrap the scheme for businesses older than three years."

Mr Goulding said FPB did welcome many aspects of the Graham Review on areas it had been vigourously campaigning on.

"We broadly approve of the drive to reduce bureaucracy, providing that actually happens,' he said. "We hope that the process will be improved by removing the requirement for the DTI to rubber stamp all loan applications. We particularly welcome the move to create greater competition between banks - by reserving a chunk of the SFLG funding for banks that demonstrate a clear focus on high-growth SMEs. Furthermore, we strongly endorse the expanding of lending limits so that all SMEs can access up to £250,000, SMEs under two years old are currently only eligible for £100,000."