Business Loan Guarantee Scheme Extended By Government
Earlier this year, the Government introduced its small business loan guarantee scheme, which was designed to help those small and medium sized businesses who may have been struggling in the face of the recession and economic slow down to receive the necessary funding they required to make ends meet whilst business was quiet.
The Government scheme was launched with £1.3 billion, which was set aside to enable banks to offer loans to small and medium sized companies, in the hope that these loans would save the companies in question from going under and being forced to make staff redundancies, thereby exacerbating the already increasing unemployment figures.
The Government has now announced that it intends to extend the small business loan guarantee scheme, due to a reduction in the number of loan applications from eligible businesses. As a result of this, the business department has been forced to widen the scope of the scheme to allow more flexibility for firms and free up more capital to ease their struggling cash flow position.
Small businesses are likely to be able to sell on their outstanding invoices to customers under the Enterprise Finance Guarantee (EFG) scheme, which should have the advantage of freeing up the cash flow. Similarly, small businesses will be able to clear their overdraft facilities through a government cheap loan, with the same end result.
However, the scheme has also been criticised for not providing enough help for small businesses. According to one of the providers of the independent finance for the scheme, Syscap, certain types of finance and loans will not be covered under the scheme. Things which will be ineligible for the scheme will include leasing agreements for equipment and plant along with private loans which have been made to the company.
