Rates Up on Enterprise Finance Guarantee Loans

Rates Up on Enterprise Finance Guarantee Loans

The Federation of Small Businesses (FSB) has criticised the Government’s decision to increase the rate of interest it charges small firms for loans under the Enterprise Finance Guarantee Scheme.

On 1st January, the rate the Government is charging small firms for guaranteed loans under the EFG scheme increased from 1.5% to 2%.

According to the Government, last year’s 1.5% rate was only intended to be used for a short period until the end of a temporary exemption from European Commission rules expired on 1 January.

“In addition to regular capital and interest payments to their lender and any arrangement fee which they may charge, firms must pay a premium to the Government,”

said a Department for Business, Innovation and Skills (BIS) spokesperson.

“The premium is equivalent to two% per annum on the outstanding balance of the loan and is assessed and collected quarterly in advance throughout the life of the loan.”

An FSB spokesman said that the EFG scheme was designed to help small firms get back on their feet and should offer the cheapest loans.

“The Government should look at these charges and reduce them so they are in line with the charges imposed by the state owned banks,” he said.

The EFG scheme was announced in January 2009 and is aiming to support up to £1.3 billion of new lending to viable businesses with a turnover of up to £25 million. Under its terms, banks are advised to lend to businesses they would be happy to lend to commercially, regardless of the guarantee from the Government.

In November last year Chancellor Alistair Darling announced that the scheme would to be extended for six months beyond the planned March 2010 end date.

Rates Up on Enterprise Finance Guarantee Loans

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