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Government to boost business lending scheme

Date Added: 05/08/2013  

The government has revealed it is set to make improvements to its Enterprise Finance Guarantee (EFG) due to a lack of interest in the scheme among the business world.

It was announced by government minister Michael Fallon that the programme has not been performing well enough since its launch and as a result it needs to be overhauled.

Speaking to the Mail on Sunday this weekend, the minister stated that the take-up of loans through the EFG dropped to a new record low in the first quarter of the year, so something has to be done to encourage firms to take advantage of the scheme.

"I am not satisfied with take-up. Businesses need to be making more use of it," Mr Fallon was quoted as saying by the newspaper, adding: "We are looking to make the scheme more adaptable and attractive."

Increasing the maximum loan available through the programme is one of the changes that has been considered by the coalition government, while it has also looked into the possibility of allowing business owners to use their own homes as guarantees against loans.

The government has struggled to boost business lending in the UK in the last couple of years despite a range of initiatives designed to improve the flow of credit to small firms.

Its Funding for Lending Scheme has been a shot in the arm for the mortgage market, but the number of loans being handed out to smaller companies has actually dropped since the programme was launched by the government and the Bank of England last year.

The British Chambers of Commerce told the Bank of England's Monetary Policy Committee (MPC) last week that it should take action to improve business lending in the UK.

David Kern, chief economist at the body, was commenting after the MPC announced it was holding the base rate of interest for the UK at its record low of 0.5 per cent for yet another month.

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Posted by Julie Cutts

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