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EFG scheme lending to small businesses continues to fall

September 5, 2012

The latest lending figures for the Enterprise Finance Guarantee scheme show that lending to small businesses has fallen further, despite the Government easing the eligibility rules to enable larger firms to apply for loans.

According to the latest Government figures, the total value of loans offered by the EFG scheme fell from £189m in the first six months of 2011 to a mere £170m during the same period in 2012, representing a 10% drop in advances.

After it became clear that the EFG scheme was failing to reach its targets, from January 1st 2012, George Osborne increased the turnover threshold for applicant firms from £25m to £44m, enabling the schemes administrators to tailor to the needs of larger businesses. This change has failed to halt the decline in lending, which will surely prove to be embarrassing to the Coalition.

Finance provider, Sycap, points out that there are no longer any Government schemes which tailor specifically for the needs of the UK’s smallest businesses (those turning over £25m or less).

The firm’s SEO, Philip White, said that the Government had failed in its stated objective to help the UK’s SMEs access finance.

“We think increasing funding to SMEs is too important a problem for the Government to turn its back on. They need to start looking at a broader range of options – for example incentivise funding for small businesses through leasing. Leasing is the one of the few areas of the small business finance market that is growing.”

White suggests that the Government should extend the same type of low-cost funding that is available under the ‘Funding for Lending’ scheme to lease finance companies that cater for the needs of small businesses

According to Bank of England statistics, total bank lending to businesses continues to fall at around 3% per annum, whilst asset finance funding for businesses of all sizes actually grew by 12% over the past year to over £20bn.