Official stats reveal Enterprise Finance Guarantee scheme lending in decline

The government’s Enterprise Finance Guarantee scheme (EFG) has recorded a 56% decline in the number of loans offered over two years, according to official figures. 

The Department for Business, Innovation and Skills (BIS) has released the latest figures showing the number of firms offered loans during the period July to September 2009 totalled 2,030, compared with just 881 from July to September 2011.   

The statistics showed the value of loans, offered via the scheme through which the government acts as guarantor on 75% of bank loans of between £1,000 and £1m, also dropped from £218m in July-September 2009 to £92m in July-September 2011.

Despite the recorded year-on-year decline, chancellor George Osborne announced in his Autumn Statement that the government will be extending the EFG scheme from January 2012 to include businesses with up to £44m annual turnover. Previously, only those with a turnover of less than £25m were eligible for the scheme.

The Labour government first unveiled the EFG scheme in 2009 to help small firms struggling to secure finance. However, the Federation of Small Businesses (FSB) told The Telegraph its members are reporting that banks are giving mixed messages about the availability of EFG.

Andrew Cave, chief spokesman of the FSB, said: "Our members are going into banks and not getting a conclusive response to questions about the EFG. There seems to be some confusion about the criteria and which businesses can access it."

A BIS spokesperson responded: "The EFG is a demand led scheme operating at the margins on commercial lending.

"EFG loans are provided from the lenders own funds and are a commercial agreement between the lender and borrower. All lending decisions are made by the bank. The government plays no role in the process, and will not intervene to direct lending."

In addition to the EFG extension next year, several new lenders, including Metro Bank, will be accredited to offer loans. BIS said it hopes this will "increase competition and choice for borrowers".