Average loans to SMEs falling under EFG scheme
THE average size of loans offered to those small businesses that have successfully secured finance under the Government’s Enterprise Finance Guarantee scheme has fallen.
Over the last 12 months the average size of each loan offered under the scheme has dropped by 7% from £107,252 in Q2 2009 to £99,859 in Q2 2010, says new British bank Aldermore.
Last month statistics released by the bank showed a reduction in loan approvals under the EFG scheme meant the amount of funding offered had fallen from £186m in Q1 2010 to £149m in Q2 2010.
In the West Midlands, a total of £14.5m was offered through the EFG scheme during Q2 this year.
In Northern Ireland, SMEs were offered £3.2m through the EFG scheme in Q2 and SMEs in Wales were offered £6.3m.
Tony Smedley, regional managing director at Aldermore Invoice Finance in the Midlands, said: “Not only has the total amount being offered under this scheme fallen but the amount of money being granted to each of the companies that got through the obstacle course has fallen too.
“We think the EFG scheme is a great idea, the Government thinks the EFG scheme is a great idea, the SMEs think the EFG scheme is a great idea.
“But clearly, if it is going to play more than a very marginal role in funding SMEs there needs to be some pretty quick changes made to it.”
Under the EFG scheme, businesses have to pay a 2% levy on the outstanding loan to the Department of Business, Skills and Innovation (BIS) as well as interest to the lender.
Mr Smedley added: “When the base rate is 0.5% businesses might think an additional 2% premium to the Government is quite steep.
“We do need SMEs to take up some of the slack in the economy especially with the public sector cutting costs. But if SMEs are really less ambitious for growth and less keen to borrow than a year ago, then that is a worry.”
