Government says business lending scheme is working

The government’s Enterprise Finance Guarantee scheme has processed more than 1,300 eligible loans worth almost £145 million, Peter Mandelson the Business Secretary has said.

Lord Mandelson, who updated the Small Business Finance Forum on the progress of the scheme, added that the value of eligible loans had increased ten-fold, from less than £3 million in week one to around £30 million a week recently.

The Minister said: “These figures are good news, showing the Enterprise Finance Guarantee is providing real help to businesses.

“However, we must continue to work with all 26 lenders signed up to the scheme to ensure frontline staff are offering it where appropriate to small companies across the country.”

Lord Mandelson also unveiled the key findings of the first ‘mystery shopper’ exercise which tested lenders on staff awareness, understanding and promotion of the EFG.

The results revealed that three-quarters of bank business advisers had a detailed awareness and understanding of the EFG’s features and its role.

But Phil Orford, who is the chief executive of the Forum of Private Business (FPB) and who attended the finance forum, expressed concern at the lack of awareness of the scheme.

Mr Orford said: “Despite some improvement in lending as a result of the government’s intervention, there remain inconsistencies with the communication and delivery of lending schemes.

“Research shows that many struggling yet viable firms face an uphill battle to access the credit they need and are being subjected to steep increases in lending costs. The central problem appears to be exactly how the banks define viability.”

The Enterprise Finance Guarantee is a £1 billion loan guarantee scheme delivered through banks and other lenders, providing an extra £1.3 billion worth of lending to businesses up to the end of March 2010.

The scheme offers a 75 per cent government guarantee on individual loans of up to £1 million to viable businesses with an annual turnover of up to £25 million.

The guarantee can be used to support new loans, refinance existing loans or to convert part or all of an existing overdraft into a loan.

There are 26 lenders registered with the scheme: Airdrie Savings Bank, Alliance and Leicester, Commercial Bank, Bank of Baroda, Bank of Ireland (NI only), Bank of Scotland, Barclays, Business Enterprise Fund, Business Finance Solutions, Clydesdale Bank, The Co-operative Bank, DSL Business Finance, GLE oneLondon, HSBC, Lloyds Group, NEL Fund Managers, Northern Bank (NI only), The Royal Bank of Scotland/Natwest, State Securities, South West Investment Group, Triodos Bank, UK Steel Enterprises, Ulster Bank (NI Only), Venture Finance, Whiteaway Laidlaw Bank, Yorkshire Bank.