Grant Funding Scheme Turns Down 99 Per Cent of Applicants
As few as one per cent of small firms that have applied for funding through the Government’s Enterprise Finance Guarantee (EFG) scheme have received help, according to a survey by financial adviser Clifton Asset Management (CAM).
The survey of 1,000 small businesses also found that just 68 per cent had heard of the scheme – and almost all of these (93 per cent) did not think it would be worth applying for because the application criteria is so tight.
The EFG scheme was announced in January this year, and is a Government initiative supporting up to £1.3 billion of new lending to viable businesses with a turnover of up to £25 million.
Under the terms of the scheme, banks are advised to lend to businesses that they would be happy to lend to commercially, regardless of the Government guarantee, according to CAM.
CAM financial director, Ellis Organ, said that the criteria businesses are required to meet to successfully apply for funding is unachievable for most firms.
“Unless a firm can demonstrate to the bank that it is in a very strong and stable position with good profitability and a good balance sheet, they are not going to lend to them,” he said. “The EFG is irrelevant if you don’t meet this high threshold. Firms should only spend time applying for lending if they meet the criteria.”
Organ added that the Government is also expecting the banks to lend to firms while paying back the public money that they have received.
“The Government, or the taxpayer, is now a shareholder in most of these banks – you can’t return capital to the shareholder and lend money at the same time,” he said.
Clifton director, Anthony Carty, criticised the Government for not publicising the scheme enough.
“If this is supposed to be the Government’s flagship idea for helping UK firms out of the recession, it is a damning statistic that more than one in four of the people we spoke to didn’t even know what the EFG was,” he said.
“This gives you the sense that maybe the Government isn’t putting as much pressure on banks to promote the scheme and lend cash as they would like us to believe,” added Carty.
The Department for Business, Innovation and Skills (BIS) said that many businesses have benefited from the scheme and that it is widely publicised, but was unable to say how many small firms have applied to the scheme.
“Already, more than 4,900 businesses have been offered loans totalling nearly £504 million under the scheme,” said a BIS spokesman. “Commercial lending should be the first port of call for companies seeking investment, but a Government guarantee under the scheme can help firms who have insufficient or no security.”