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Government loan scheme is a waste of time, say businesses

Businesses consider that applying for a loan under the government Enterprise Finance Guarantee scheme is a waste of time, according to a survey.

Only 10 businesses out of 1,000 surveyed had received funding under the EFG scheme.

The EFG is available to businesses with an annual turnover up to £25 million that are seeking loans of between £1,000 and £1million, repayable over 10 years. The loans come from high street banks and other commercial lenders but the government underwrites 75% of borrowing. According to the research, by Clifton Asset Management (CAM),  most small business owner/managers believe applying for an EFG loan sis pointless.

About 70% of small business owners know of the scheme,  but 93% of them said they saw ‘little point’ in making an application.

CAM director Anthony Carty said the research findings backed up anecdotal evidence suggesting businesses found securing bank finance even with the introduction of the EFG ‘near-impossible’.

“If this is supposed to be the government’s flagship idea for helping UK SMEs out of recession then it is a damning statistic that over one in four of the people we spoke to didn’t even know what the EFG was, leaving you with the sense that maybe the government isn’t putting as much pressure on the banks to promote the scheme and lend cash as they would like us to believe,” he said.

The government has defended the EFG scheme, insisting that thousands of businesses have benefited from loans and more than £500 million worth of applications have been granted or are in the process of being assessed.

Under EFG,  the government guarantees lending to viable businesses to ensure that they can get the working capital and investment that they need.

£1.3 billion is available to support bank lending of secure loans of between £1,000 and £1 million, over terms from three months to 10 years, to UK small businesses that cannot easily access finance. 

The scheme is available through 27 lenders until March 2010.


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