Loan Scheme Suffering Tricky Start

Mon, 16 Mar 2009

The small businesses minister has offered assurances that the government’s Enterprise Finance Guarantee Scheme will go ahead as planned. The flagship scheme has been the subject of criticism, with accusations levelled at the government that many businesses are unaware of the scheme, and those who are aware of it have to guarantee the loans.

The allegations were supported by a survey from the British Chamber of Commerce which found that only 10 per cent of the 250 firms surveyed knew about the scheme, whilst just one company had been offered such a loan. Indeed, a number of small businesses and entrepreneurs who have applied for such loans have either been rejected or have withdrawn their application after it became clear that the risk lay personally with the firm’s directors.

In an interview with BBC Radio 4’s Money Box, the small businesses minister Shriti Vadera said, ‘We've now hit the rate that we need of eligible applications every week which means the scheme is completely on course. We've currently got £115m of eligible applications, about £30m a week.’ The scheme aims to persuade banks to lend £1.3 billion worth of loans, with guarantees from the government that it will pay banks 75 per cent of the value of the loan if the borrower defaults.
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