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Small Businesses: Government Assistance

Volume 492: debated on Wednesday 20 May 2009

To ask the Minister of State, Department for Business, Enterprise and Regulatory Reform how many small businesses have applied for a loan through the Enterprise Finance Guarantee scheme since its creation; what criteria are used by his Department on deciding suitability for a loan under the scheme; under what circumstances such a loan would be refused; how many applications have been (a) accepted and (b) refused; what the average loan was; whether interest is charged on each loan; how much has been allocated by his Department to the scheme; and if he will make a statement. (259063)

The Enterprise Finance Guarantee (EFG) came in to operation on 14 January. A 75 per cent. Government guarantee for loans will support bank lending of three months to 10 year maturity. Eligible businesses should have a turnover of up to £25million. The scheme will enable them to secure loans of between £1,000 and £1 million through the Government guarantee. The scheme can also be used to convert an existing overdraft into a loan, enabling small and medium sized enterprises (SMEs) to use these overdraft facilities to meet working capital demands. A Premium of 2 per cent. per annum (1.5 per cent. during 2009) on the outstanding balance of the loan is also payable to BERR, in addition to the loan repayments and any interest set and charged by the lender.

Decisions on individual lending rests with the lender, whose decision will follow a commercial assessment of the viability of the proposition and the ability to service the loan and other charges, the suitability of EFG as opposed to lender's other commercial lending products, and the EFG eligibility criteria (including sector restrictions as detailed on the BERR website).