News

December 18, 2009

Third of small firms unaware of Enterprise Finance Guarantee scheme

More than a third of small firms are unaware of the Government’s “flagship initiative” to help businesses get through the recession, research from Clifton Asset Management (CAM) has revealed.

The survey of 1,000 small businesses found that 37 per cent had not heard of the Enterprise Finance Guarantee (EFG) scheme. Of those firms that had heard of it, however, 89 per cent would consider using it. But the research also suggested that as few as one per cent of small firms that have applied for funding through the scheme have received financial support.

CAM director, Anthony Carty, criticised the Government for not doing enough to publicise the scheme. “If this is supposed to be the Government’s flagship idea for helping UK firms out of the recession, it is a damning statistic that four out of ten people we spoke to didn’t even know what it was,” he said.

“This gives you the sense that maybe the Government isn’t putting as much pressure on banks to promote the scheme and lend cash as they would like us to believe,” added Carty.

Commenting on the CAM survey results, a Department for Business, Innovation and Skills (BIS) spokeswoman, said: “The scheme was designed to help a small percentage of businesses who, in better times, would have no problem securing lending but who can be seen as a risk by banks in a time of recession. It wasn’t meant to act as a replacement for commercial loans.”

According to Government statistics, since its launch in January more than 6,850 businesses have been offered loans through the EFG scheme, totalling more than £692 million.

However, CAM financial director, Ellis Organ, said that the criteria businesses are required to meet to successfully apply for funding is unachievable for most firms.

“Unless a firm can demonstrate to the bank that it is in a very strong and stable position with good profitability and a good balance sheet, they are not going to lend to them,” he said. “The EFG is irrelevant if you don’t meet this high threshold. Firms should only spend time applying if they meet the criteria.”

The EFG scheme was first announced in January this year and is an initiative supporting up to £1.3 billion of new lending to viable businesses with a turnover of up to £25 million. Under the terms of the scheme, banks are advised to lend to businesses that they would be happy to lend to commercially, regardless of the Government guarantee.

In the recent Pre-Budget Report, Chancellor Alistair Darling announced that the EFG scheme would be extended to run for another six months beyond its planned March 2010 cut-off date.