UK Government

Department for Business, Innovation and Skills: Over £500m of Government-Backed Loans Boosts Business Prospects

Press Release   •   Dec 22, 2009 15:53 GMT

Please note correction in Notes to Editors. The comany name should read Green Lite in the third case study.

Companies from printing firms to lighting groups have improved their business prospects after benefitting from more than half a billion pounds of Government-backed loans, Small Business Minister Lord Davies announced today.

More than £580m in loans has been drawn down by more than 5,840 businesses under the Enterprise Finance Guarantee (EFG), and is already being used to boost cash flow and help companies invest in new staff and equipment. Loans totalling around £720m have been offered to businesses.

The announcement came as the Department for Business published a report into the effectiveness of the scheme.

The early stage assessment of EFG showed 94 per cent of respondents said their business prospects had improved following receipt of the loan, and 84 per cent reported EFG had helped their prospects of survival. Almost all EFG recipients felt that they wouldn’t have been able to achieve the same business outcomes at the same speed or scale, if at all, without EFG.

Trade, Investment and Small Business Minister Lord Davies said,

“These impressive results show the Government is providing real help to businesses when they need it, helping to secure jobs and give businesses the capital they need to invest and grow.

“The Enterprise Finance Guarantee has been welcomed by business and, following its recent extension, it will continue to play a vital role in encouraging enterprise and investment and driving productivity and growth throughout the UK economy.”

Other benefits included:

*   Improved cash flow

*   The introduction of new products or processes

*   Using EFG as a platform for businesses growth

*   Around 60 per cent said the funding helped to create jobs at their business, either already or anticipated at some point in the future

*   57 per cent of the respondents reported they had saved jobs, all attributed to EFG.

According to the 385 respondent businesses, some 1,870 jobs have been saved, 350 jobs have already been created and a further 550 new jobs are expected in the future, due to receiving EFG-backed lending.

Scaling up this sample to the entire population of firms offered EFG-backed loans up to the start of October, suggests EFG could have already been responsible for saving and creating an estimated 31,600 jobs, with potentially around a further 8,400 jobs to be saved or created in the future.

As of 18 December, more than £1.04bn of eligible applications from over 9,200 firms have been granted, are being processed or assessed. More than 7,100 businesses have been offered loans totalling nearly £717m. This is lending that would not have otherwise taken place.

At Pre-Budget Report, the Chancellor announced EFG would continue for another year. The decision will enable up to £500m of additional bank lending between 1 April 2010 and 31 March 2011 to companies which lack the collateral to get a normal commercial loan. It is available for viable firms with an annual turnover of up to £25m, looking for loans of up to £1m for a period of up to 10 years.

Chief Secretary to the Treasury Liam Byrne said:

"Complacency is the biggest threat to the recovery and Government needs to continue to support the economy until recovery is locked in.

"By extending the Enterprise Finance Guarantee for another twelve months in the Pre-Budget Report, the Chancellor demonstrated the Government's determination to continue supporting businesses. Withdrawing that support would put the recovery at risk."

Notes to editors

 

1) Case Studies

Attic Self Storage (London)

East-London business Attic Self Storage (www.atticselfstorage.co.uk) used an EFG loan to expand, putting the 18-month year old company on track to achieve a £1 million turnover next year.

Managing Director Frederic de Ryckman de Betz said:

“Securing an EFG loan meant I have been able to continue investing in the business this year.  The funding was used to complete a second phase of expansion, which involved refitting 10,000 sq ft of the company’s premises.”

Fluid Branding (St Austell)

St Austell-based corporate gift and branded merchandise supplier Fluid Branding (www.fluidbranding.com) used an EFG loan to invest in a new IT system.  The company has seen a sharp rise in demand and the investment made possible via the EFG scheme will enable it to maintain strong cash flow as it expands.

Fluid Branding Director Matt Franks said:

“When we were looking at the investment in technology we looked at different ways of funding it.  We approached Lloyds TSB at the time and secured an EFG loan with no hassle at all.  It was a very straightforward process and this allowed us to invest in technology to take us forward as a company.”

Green Lite Solutions (Warrington)

Commercial environmental lighting business Green Lite Solutions UK (www.greenliteuk.com) used an EFG loan to support its growth plans and expand its vehicle fleet.  The Warrington-based business works with multi-site commercial companies, typically enabling them achieve energy savings of over 45 per cent.

Managing Director Bob Hall said:

“The funding we received from the EFG loan gave us the capital we needed to grow our business significantly and take it to the next level.  The process to get the loan was simple and straightforward.”

2) The Early Stage Assessment of the Impact of EFG on Recipient Firms was carried out by the Policy Research Group of Durham University, located at St Chad’s College.  The report is based on findings from a telephone survey of 385 EFG recipients, conducted in September and early October 2009.  The respondent businesses are representative of all businesses which received an offer (which had not subsequently been cancelled) for EFG backed lending between 1 March 2009 and 3 September 2009. The full report can be found at: http://www.berr.gov.uk/whatwedo/enterprise/au/research-evaluation/globally-competitive/page38372.html

3) This research provides an early assessment of the impact of EFG.  The purpose of the study was to understand the experiences and the benefits for businesses receiving EFG loans.  The three principal areas considered were: (i) the process of borrowing with the backing of EFG; (ii) the level of satisfaction of borrowers under EFG; and (iii) the extent and nature of impacts of EFG on recipient businesses.

4) The EFG was launched in January 2009. At the PBR, the Chancellor announced EFG would continue for a further 12 months (to end March 2011) to help secure up to £500m of additional bank lending to SMEs between 1 April 2010 and 31 March 2011.

5) Under the Enterprise Finance Guarantee (EFG) Government provides the lender with a guarantee of 75 per cent of the loan to viable SMEs on the margins of commercial lending. It can be used to support:

  • new loans
  • refinance existing loans at risk due to the deteriorating value of security
  • to convert part or all of an existing overdraft into a loan to release capacity to meet working capital requirements
  • to guarantee on invoice financing facilities to support an agreed additional advance on a companies debtor book
  • to guarantee new or increased overdraft borrowing for SMEs experiencing short term cash-flow difficulties.

6) The guarantee is available through 37 lenders:

Airdrie Savings Bank,  Alliance and Leicester Commercial Bank, Allied Irish Bank, Bank of Baroda, Bank of Cyprus UK, Bank of Ireland (NI only), Bank of Scotland, Barclays, Big Issue Invest, Bolton Business Ventures, Braveheart Investment Group, Business Enterprise Fund, Business Finance Solutions, Capitalise Business Support, Close Brothers, Clydesdale Bank, The Co-operative Bank, Cumbria Asset Reinvestment Trust, Donbac, DSL Business Finance, First Trust Bank (NI only), GLE oneLondon, HSBC, IGF Invoice Finance, Lloyds Group, NatWest, NEL Fund Managers, Northern Bank (NI only), The Royal Bank of Scotland, State Securities, South West Investment Group, Triodos Bank, UK Steel Enterprise, Ulster Bank (NI only), Venture Finance, Whiteaway Laidlaw Bank and Yorkshire Bank.

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