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Enterprise Finance Guarantee “not working”, according to experts

1 April 2009

Print finance experts told PrintWeek that the government-launched Enterprise Finance Guarantee (EFG), designed to encourage banks to lend to small businesses is “not working”, identifying several flaws in the scheme.

Launched in January, the EFG scheme replaced the Small Firms Loan Guarantee (SFLG). Open to businesses with an annual turnover of up to £25m, the terms of the scheme say to support up to £1.3bn of new lending by banks, Government guaranteeing 75% of the loan. However, it has been reported that many lenders are demanding 100% personal guarantees from company directors, despite these terms.

Richmond Capital Partners chief executive Paul Holohan said of the EFG: "The evidence from the many people we talk to is that it is nothing more than blatant spin with little or no real substance."

Additionally, because national banks now dominate the list of EFG lenders, whereas the SFLG included more regional lenders, the EFG lists only 26 recognised lenders, compared to the 33 organisations that had been involved in the SFLG - an issue that could mean less money will be available to the market in the short term.

Tim Morris, divisional director at asset-based lender Davenham, identified another major flaw in the scheme as failing to include asset finance. Said Morris: “By not including hire purchase and leasing, it is not serving the interests of the large number of SMEs, especially in print, that are reliant on such forms of finance."



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