Banks urged to give more support to loan guarantee scheme

Business Minister Shriti Vadera (pictured) today (24 July) welcomed the Business and Enterprise Select Committee report on the Enterprise Finance Guarantee which, she said, had seen thousands of businesses benefit from the government guaranteed loan. The Minister added that she also welcomed the committee's interest in testing experience of businesses with their banks and said the government would continue to monitor uptake and performance of the banks to ensure EFG played its part in getting access to finance for small and medium businesses. "I encourage any small and medium business experiencing difficulty in obtaining a loan or overdraft to talk to banks about the possibility of using the EFG," she added. Some 4,000 businesses had been offered an EFG loan, with an overall value of £400 million. EEF, the manufacturers' organisation gave its strong support to the report and the call for banks to play their part in increasing the flow of lending. EEF director of policy, Steve Radley, said the banks had to play their part in ensuring EFG's success. "There are still too many examples where tighter terms and conditions are being imposed which is turning many manufacturers away from using the scheme. If we fail to unlock this blockage companies' efforts to prepare for the upturn will continue to be hampered," he went on. According to EEF's data, despite the introduction of such schemes and record low interest rates, the cost of finance had continued to increase while availability had tightened. Figures published last month by EEF (1) showed 45 % of firms reported a significant or moderate increase in the cost of finance in the past two months, up from just over 37% in the first quarter of 2009. Over the same period, the proportion of firms reporting a reduction in the availability of new lines of borrowing fell from 49% to 42% but only just over 4% of companies had seen an improvement. In addition more companies (39%) reported an increase in the fees on existing borrowing, up from 34% in the first quarter and 27% at the end of last year.