More small businesses benefiting as British Business Bank lending scheme hits 3 year high

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Small and medium-sized enterprises (SMEs) are increasingly able to secure bank loans supported by the government-backed Enterprise Finance Guarantee (EFG), as lending under the scheme reached its highest level since 2010.

Enterprise Finance Guarantee (EFG) scheme lending figures, published today (22 November 2013), show banks offered loans worth £111 million to SMEs in the third quarter of 2013, the most since 2010. As well as the banks offering more, and bigger EFG loans to SMEs, the value of EFG loans drawn by businesses this quarter was £87 million, the highest since 2011.

EFG is a demand-led scheme which allows banks to lend to SMEs who would otherwise not receive credit, by providing the banks with a government guarantee for 75% of the loan value. Since May 2010, over 13,400 SMEs have been offered EFG loans with a total value of nearly £1.4 billion.

Business Secretary Vince Cable said:

“Ensuring small businesses have access to the finance they need in order to grow and thrive remains a crucial issue. The EFG scheme is making a vital contribution and businesses needing finance should take heart that the banks seem to have upped their game.

“But there are long-standing problems with the finance markets which need addressing, and that is why I have created the British Business Bank . We need a much more competitive and diverse market, which businesses of all sizes can have confidence in and helps build a stronger economy.”

In total, EFG supported lending is available through 42 finance providers, including all of the main high street banks. Today’s figures show considerable progress has been made across the board since the same quarter last year, with Barclays Bank in particular consistently offering increased EFG lending since 2012. In the last quarter, Barclays offered nearly twice as much in loans to businesses compared to the same period last year, despite the number of loans offered only increasing slightly.

Enterprise and Skills Minister Matt Hancock said:

“As the economy recovers, more and more businesses are looking to invest but they can only do so if they can get the loans they need. Today’s figures show EFG supported lending at its highest level since 2010 and this is a reflection of how we have worked with the banks to encourage EFG lending.

“We have a record number of businesses in the UK and we are determined to do everything we can to make sure our small and medium-sized businesses are able to succeed both at home and abroad.”

Business Minister Michael Fallon wrote to the Chief Executives of the 5 main high street banks in September 2012 to challenge them to increase their EFG lending after lending continued to fall significantly from the peak in 2009. This was despite the government, in partnership with the banks, making a number of changes to the scheme to make it more flexible and easier to access.

The EFG is 1 of the schemes that has been brought under the British Business Bank , which is being set up by as a government-owned economic development bank. It has recently appointed Ron Emerson as Chair and confirmed the first £45 million commitments from its £300 million Investment Programme.

Notes to editors
1.In quarter 3 2013 (July – September), banks offered £111 million to small and medium-sized businesses through the EFG scheme, the highest since quarter 3 2010. There is a maximum 6 month period between loan offer and draw down. The number of loans offered was the highest level since quarter 1 2011.

2.£84 million was lent to businesses by banks through the EFG scheme in quarter 3 2013, the highest since quarter 1 2011.

3.Compared to the same quarter last year, the value of EFG loans offered increased from £96 million to £111 million, an increase of 15%.

4.Since May 2010, the EFG scheme has supported 13,411 loans and enabled the lenders to offer just under £1.4 billion.

5.A full breakdown of EFG lending is available at ‘Understanding the Enterprise Finance Guarantee’.

6.A recent independent study found that the EFG scheme had 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 is available at Economic Evaluation of the Enterprise Finance Guarantee Scheme

7.The changes the government has made to the EFG scheme 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
  • raising the level from 13% to 20% of the lenders annual lending portfolio to which the government guarantee applies 

8.EFG is 1 of a range of government-backed schemes totalling £2.9 billion that are being brought together under the British Business Bank initiative. A further £1 billion of new capital will be deployed by the Business Bank in partnership with the private sector to further increase the amount of finance available and the choice of finance providers to businesses.

9.The British Business Bank will support economic growth by bringing together public and private sector funds to create more effective and efficient finance markets for small and medium-sized businesses in the UK. The Business Bank is a key element of the government’s Industrial Strategy, and its programme is already contributing to making the UK the best place in Europe to start, grow and finance a business.

10.The British Business Bank programme is currently run directly by the Department for Business, Innovation and Skills and is not authorised or regulated by the Financial Conduct Authority or the Prudential Regulation Authority. Once HM Government has received European Commission State aid clearance, which is expected in 2014, this programme will be transferred in its entirety to the British Business Bank plc, which will operate as a government-owned financial institution.

11.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 4 ambitions in the ‘Plan for Growth’, 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.