Government loans scheme takes a tumble
27 07 2007 United Kingdom
The government’s loan guarantee scheme for small businesses has reported a sharp drop in lending since it was revised in December 2005.
A report by the Department for Business, Enterprise and Regulatory Reform shows that loans to small businesses under the Small Firms Loan Guarantee scheme (SFLG) have fallen by half in one year.
In 2005/06 the scheme supported 5,800 loans to small businesses; the following year this fell by more than half to 2,700 loans.
At its peak in 2004/5, 7,100 loans were made with the backing of the SFLG scheme, with a value of over £480 million. The value of SFLG loans has now fallen to just £210 million.
The Small Firms Loan Guarantee (SFLG) scheme was introduced by the Department of Trade and Industry in 1981 to address a gap in the market for small firms seeking access to finance for their businesses.
There has been long-standing concern that banks base their loan decisions mainly on collateral security available from small businesses rather than their future business prospects. The SFLG scheme provides a government guarantee to encourage banks and other financial institutions to lend to small firms that lack the required collateral.
Since its introduction, the SFLG scheme has undergone five value-for-money reviews. In December 2005 the government removed the maximum loan limit of £100,000 for businesses under two years old and introduced a five-year age limit. The new five-year rule is believed to account for 40 per cent of the recent fall in loans under the scheme.
Back to top of page
© 2007 Copyright topenterprise uk ltd All rights reserved
Property of topenterprise uk ltd and made available under the terms of use notice on this web site
Click on any of the defining keywords below to search for specific matches: