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Business: Credit

Volume 508: debated on Thursday 8 April 2010

To ask the Minister of State, Department for Business, Innovation and Skills what steps his Department has taken to increase the level of access to credit for small businesses in (a) Coventry and (b) the West Midlands in the last two years. (325767)

The Government have introduced a range of measures to help businesses through the global recession and to promote growth during the recovery. These include:

The Enterprise Finance Guarantee (EFG)

This encourages additional bank lending to creditworthy SMEs with viable business cases who do not have sufficient security available to support their borrowing request on a normal commercial basis. Over £1.28 billion of eligible EFG applications from over 11,400 firms have been granted, are being processed or assessed, and over 8,940 businesses have been offered loans totalling nearly £910 million.

Set out in the following table is the information for the Enterprise Finance Guarantee for Coventry and the west midlands.

Number of loans offered

Number of loans drawn

Value of loans offered (£ million)

Value of loans drawn

Coventry

26

19

4.07

2.43

West midlands

812

687

83.07

67.08

The Capital for Enterprise Fund

The fund supports viable businesses with equity or mezzanine investment aimed at releasing and sustaining growth, investing between £200,000 and £2 million where the business has exhausted its borrowing capacity with lenders.

To date the appointed fund managers have made offers totalling £98.7 million to 66 businesses, including three in the west midlands worth £4.8 million. 26 businesses have received investment, including one in the west midlands with a value of £2 million. I am not providing this breakdown by parliamentary constituency as this could make it possible to identify the individual companies that have received, or are under consideration for, support.

The fund is now closed to new applications, although businesses are still receiving investments from existing applications.

HM Revenue and Customs’ Business Support Service

This reviews payment of businesses tax liabilities and tries to come to an arrangement that allows companies to spread payments to help them over temporary difficulties. So far, there have been agreements made with over 200,000 businesses to spread more than £2.5 billion in business taxes. Changes to tax rules allow loss-making businesses to temporarily extend trading loss carry-back from one to three years for losses up to £50,000. In the west midlands, 27,800 arrangements have been made to defer payments of £480 million.

Business Link Health Checks

These provide a free review of businesses with a professional business adviser for hands-on advice and help accessing the full range of Government help. To the end of February 2009, over 128,000 businesses benefitted from a health check, including 15,487 businesses in the west midlands.

Prompt Payment

In the financial year 2009-10, central Government expects to pay an additional £40 billion to suppliers within 10 days (a target set in October 2008) compared to 2008-09, and 19 out of 20 central Government invoices are now paid in 10 days.

The Working Capital Scheme (WCS)

WCS has provided guarantees to two banks on portfolios of short-term loans with good credit risk in order to release regulatory capital to enable those banks to increase lending to businesses. The two banks with WCS guarantees, Lloyds Banking Group and Royal Bank of Scotland, have made lending commitments of £39 billion.

Public Borrowing Review 2009 announced that as the broader Asset Protection Scheme now provides banks with considerably greater capital release, so new portfolios will not be guaranteed under the WCS although existing portfolio guarantees will remain until March 2011. Companies’ access to the WCS was through the banks; they did not apply for it directly.

To ask the Minister of State, Department for Business, Innovation and Skills what recent discussions he has had with representatives of small and medium-sized enterprises located in Coventry on their access to credit. (325768)

Access to credit is a key issue as UK economy moves to recovery. Ministers are in regular contact with small and medium-sized enterprises (SMEs) and access to credit continues to be a major topic for discussion. In particular, the Minster for Trade, Investment and Small Business visited Coventry, Birmingham and Worcester in 2009, where he participated in Q and A sessions with businesses of all sizes on a variety of topics. He also attended the 2010 annual FSB conference where access to credit featured in the discussion with the audience.

The Minister for the West Midlands has regularly discussed the issue in his meetings with local business organisations and local business people and it was featured in his speech to the West Midlands Economic Forum which took place in February in Coventry.

Access to finance for SMEs was recognised in Budget 2010 where the Government, building on their support to business through the downturn such as the Enterprise Finance Guarantee scheme, announced measures such as the launch of the UK Finance for Growth, a body responsible for overseeing the Government stock of over £4 billion of SM finance products, including the Growth Capital Fund (announced in PBR 2009), for which £200 million of cornerstone investment has been raised so far from private sector and Government.

In addition, the UK is continuing to work with the EU’s financial institutions (the European Investment Bank and the European Investment Fund) to stimulate more venture capital and loan support for SMEs. Furthermore, the Budget announced the Small Business Credit Adjudicator (SBCA). Once established the SBCA will hear cases, referred by Business Link’s Financial Intermediary Service (FIS), where a business may have been unfairly denied credit.

To advise on the role and responsibilities of the SBCA the Government have launched a new task force. Enterprise Champion Lord Sugar, outgoing Federation of Small Businesses chairman John Wright and former Lloyd’s TSB deputy chief executive Mike Fairey will comprise the task force. They will build on the work Lord Sugar has been doing with small businesses, FIS and the banks.