Loan scheme funding shows a decline

New figures suggest that lending to firms under the Government's Enterprise Finance Guarantee (EFG) scheme has fallen this year.

The EFG, which was introduced during the credit crunch, is designed to offer access to funding to smaller enterprises that would otherwise find it difficult to raise money for growth from banks and venture capital companies.

But according to UK bank, Aldermore, the actual worth of EFG loans slipped by 11 per cent in the first three months of the year, down to £92 million from the £103 million loaned in the last quarter of 2010.

The latest figures indicate that the level of EFG financing is at its lowest since the scheme was set up in 2009.

Indeed, there has been a steady slide in the value of loans offered over the past two years. Compared with its 2009 peak, lending is now down by 51 per cent.

Philip Monks, the chief executive officer at Aldermore, said: "Under project Merlin the UK banks have set themselves a target for gross business lending of about £190 billion for 2011 which puts into perspective the amount of money currently being lent through the EFG scheme. EFG should be a very powerful tool to get those banks that had been slow to lend to SMEs to extend them more credit.

"Lending through the EFG is now half of what it was at the peak - that should be a concern. The economy is still weak and the latest inflation figures show that businesses are having to struggle with soaring raw material costs."