EFG Scheme Boosts the Economy
As do StartUp Loans and Seed Enterprise Investment Scheme (SEIS).
Financial initiatives to help startups, entrepreneurs and small businesses are having a marked effect, according to the latest research.
An independent study, carried out by Durham Business School, looked specifically at the economic impact of businesses that took out a loan under the Enterprise Finance Guarantee (EFG) Scheme in 2009.
January 2009 was the height of the credit crunch and EFG, which replaced the Small Firms Loan Guarantee (SFLG) scheme, was launched as a way to get credit to businesses that didn’t have the track record for commercial loans.
EFG provides loans, overdrafts and invoice facilities for SMEs of between £1,000 and £1 million, with the government backing 75% of the loan.
The study group was monitored for a sufficiently long enough period of time that a number of factors could be observed and reported.
Comparisons were made between small businesses, specifically between borrowers and non-borrowers. The ultimate goal was to asses whether or not EFG had contributed to their business success.
EFG Adds £1.1billion to UK Economy
The study found that the EFG scheme added £1.1 billion to the economy and that for every £1 invested, the net economic benefits generated amount to £33.50
Excluding individual entrepreneurs, additional economic benefits included saving an estimated 12,400 jobs and creating a further 6,500 positions.
Business minister, Michael Fallon, was impressed by the positives shown in the study and is calling on more financial institutions to offer monetary assistance to SMEs through the EFG scheme;
“Clearly the demand is there for this type of financial support so we must start to see an increase in take-up. I have already begun publishing EFG lending by each individual bank, because businesses should know which bank they are best off approaching and I will continue holding the banks to account until lending levels improve.”
The latest EFG statistics for lending by banks can be found on this government spreadsheet (XL document)
Other Lending Schemes Are Available
In addition to the Enterprise Finance Guarantee scheme government-backed finance is also available through other lending schemes.
One is the Seed Enterprise Investment Scheme (SEIS) which helps early-stage companies raise finance through investor buying shares. As part of the Business In You campaign there gave been a number of sessions introducing entrepreneurs to SEIS with one session still to be held in the first week of March (See Free Educational Sessions: Business Finance)
Start Up Loans is another scheme, which has recently been topped up by an additional £30 million of government money. Budding entrepreneurs aged between 18 an 30 years old can apply for finance to start their own business, as long as they have a solid business plan. The scheme, started under a year ago, has recently announced that it has helped its 1,000th entrepreneur this month.
The full report can be seen at Economic evaluation of the Enterprise Finance Guarantee (EFG) scheme