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Loans from business lending scheme hit new low

Date Added: 16/07/2013  

The total amount of bank loans used by small to medium-sized enterprises (SMEs) under the government's Enterprise Finance Guarantee (EFG) scheme dropped to a new low in the first three months of 2013.

According to a new report from independent finance provider Syscap, MEs used only £66.3 million in EFG loans to in the first three months of the year, which is the lowest quarterly figure recorded since the programme began in 2009.

Although the EFG was created by the government to help firms to access bank loans in the post-credit crunch period, it does not seem to have had a positive impact on business lending.

Chief executive officer at Syscap Philip White stated that another government project, the Funding for Lending Scheme - which was set up last year in conjunction with the Bank of England - has also failed to increase the amount being loaned to SMEs in the UK.

"Businesses must look elsewhere for help with their cash flow," he said, adding: "The bank is not the only option for small businesses looking for funding to help smooth out their cash flow."

Syscap is therefore launching Short Term Business Loans, which it says is a new funding solution for SMEs. The company is aiming to allow firms to borrow over three, six or 12-month periods, which the organisations claims will provide more freedom to companies that are struggling to manage their cash flow effectively.

"Short Term Business Loans can also help businesses that want to free up capital to continue to invest in critical projects," said Mr White.

The Bank of England's Monetary Policy Committee (MPC) was recently urged to focus on improving business lending conditions in the UK, as this would boost the economic recovery as well.

According to David Kern, chief economist at the British Chambers of Commerce, SMEs need more help to grow and the MPC ought to step in with a new initiative to help them to do.

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Posted by Julie Cutts

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