Fallon: Lending boost from British Business Bank lending scheme must be maintained

New figures published today show that bank lending to small and medium sized businesses (SMEs) through the Enterprise Finance Guarantee (EFG) scheme has begun to show improvement.

The upturn comes after the government wrote to the banks and publicly named those failing to make full use of the scheme to get finance out to firms.

Bank of Scotland, Lloyds and Santander have all reported significant increases in the use of EFG to support businesses seeking credit, with Q4 lending for 2012/13 at £91.7 million – the highest level since September 2011.

The EFG is a major government scheme which aims to increase access to finance for viable SMEs. To date, it has resulted in over £2 billion being lent to over 20,000 small and medium sized firms.

Use of the guarantee scheme peaked when it was first launched in 2009, but the Department for Business, Innovation and Skills (BIS) took action following disappointing lending figures in 2012. Alongside changes to make the scheme more accessible and easier to use, the Business Minister challenged the chief executives of the five main high street banks to make better use of EFG.

Business Minister Michael Fallon said:

This is an important step towards increasing the finance small firms can access. Some banks are working harder, and they should be recognised for that.

It’s important this isn’t a one-off. Banks must continue to improve their use of EFG. Access to finance is a crucial issue to SMEs and economic growth will depend on businesses having the certainty that banks are lending. This increase needs to be maintained to improve business confidence and demonstrate that responsible lending can still take place.

Enterprise Finance Guarantee lending complements commercial bank lending rather than competing against it, but ensures those SMEs at the margin that would be turned down for a bank loan due to lack of security or sufficient track record are able to secure finance.

It promotes lending by providing a 75 per cent government guarantee on a banks’ lending, allowing them to provide loans to SMEs that would otherwise have been turned down.

Notes to Editors:
1.In Q4 2012/13, banks offered 885 loans with a value of £91.7 million, up from 767 and £71.6 million in Q3 2012/13

2.Compared to the same quarter in 2011/12, lending was up by £7.2 million and there were 92 more offers in Q4 2012/13

3.Total EFG lending since the scheme began in January 2009 now stands at £2.14 billion, with 20,903 SMEs having been offered EFG loans

4.A recent independent study found that the EFG scheme has delivered a net £1.1 billion benefit to the economy, and is value for money as every £1 invested by government delivers £33.50 to the economy. The full report can be downloaded here

5.The changes the government has made to the EFG scheme over the past year include: * increasing the turnover limit from £25 million to £41 million * replacing the £1 million per business lifetime scheme limit with a rolling £1 million outstanding limit * raised the level from 13 per cent to 20 per cent of the lenders annual lending portfolio to which the government guarantee applies

6.Full EFG lending data is available online at:

7.The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:

  • to create the most competitive tax system in the G20
  • to make the UK the best place in Europe to start, finance and grow a business
  • to encourage investment and exports as a route to a more balanced economy
  • to create a more educated workforce that is the most flexible in Europe.

Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.