Skip to main content

Business: Government Assistance

Volume 508: debated on Thursday 8 April 2010

To ask the Minister of State, Department for Business, Innovation and Skills what recent assessment he has made of the effectiveness of the small firms loan guarantee scheme. (325138)

[holding answer 30 March 2010]: In January 2010, the Department published the Economic Evaluation of the Small Firms Loan Guarantee undertaken by the Institute of Employment Studies.

This study rigorously tested the effectiveness and value for money of SFLG and concludes that the basic rationale for SFLG is supported and that it appears to be a cost-effective way of supporting additional economic activity in the small business sector.

More specifically, the majority (81 per cent.) of SFLG recipients receive SFLG on their first loan application. For a majority (76 per cent.) of SFLG recipients, there were no alternative sources of finance available to them.

This is confirmed by 79 per cent. of SFLG recipients reporting the bank would probably, or definitely not, have given them a loan without SFLG. Just under half (49 per cent.) of businesses would definitely, or probably not, have proceeded with their project without SFLG.

A growth in sales, jobs and exports is attributable to SFLG supported lending within the first two years of the loan. The 3,100 SFLG supported businesses in 2006 have created between 3,550 to 6,340 additional jobs in the two years following receipt of the loan, created between £75 million and £150 million additional sales over two years; and were responsible for £33 million exports per annum.

Just within two years of receiving the loan the benefits of the scheme are outweighing the costs.

SFLG appears to be a particularly cost effective way of creating additional employment.

The full report is available via the BIS website:

http://www.bis.gov.uk/files/file54112.doc

The Small Firms Loan Guarantee was replaced by the Enterprise Finance Guarantee in January 2009.

To ask the Minister of State, Department for Business, Innovation and Skills what discussions his Department has had with Royal Bank of Scotland on its administration of the small firms loan guarantee scheme. (325139)

[holding answer 30 March 2010]: The Small Firms Loan Guarantee (SFLG) was replaced by the Enterprise Finance Guarantee (EFG) in January 2009.

Ministers have regular discussions with representatives of each of the main UK lenders regarding a range of SME finance issues including via the Small Business Finance Forum.

Capital for Enterprise Ltd. (CfEL), which is responsible for operational delivery of SFLG and EFG on behalf of the Department, maintains a regular dialogue with each of the accredited lenders specifically regarding their administration of these schemes.

To ask the Minister of State, Department for Business, Innovation and Skills how many (a) small, (b) medium-sized and (c) large businesses in Birmingham have received assistance under (i) the Working Capital Scheme, (ii) the Enterprise Finance Guarantee scheme, (iii) the Capital Enterprise Scheme, (iv) the Regional Loan Transition Fund and (v) the Phoenix Fund since each scheme's inception. (325338)

The information is as follows:

(i) The Working Capital Scheme (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.

(ii) The Enterprise Finance Guarantee is open to SMEs with a turnover of up to £25 million, rather than large businesses. A total of 142 loans worth £16.16 million have been offered to Birmingham businesses under the Enterprise Finance Guarantee, of which 118 loans worth £11.40 million have been drawn down. Loans under the scheme are available to firms with a turnover of up to £25 million and are not therefore available to large businesses.

(iii) The Capital for Enterprise fund provides support to SMEs rather than large businesses. 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.

(iv) The Advantage Transition Bridge Fund (ATBF) provided loans worth £2,677,000 to 18 companies in Birmingham. Information breaking these loans down by the size of the businesses is not available. The fund closed for new loans from 1 December 2009.

(v) During the Phoenix fund (which ran from 2002-06) Government provided £1.886 million to Community Development Finance Institutes (CDFIs) operating mainly in the Birmingham area. This capital was onward lent to 130 start up and existing businesses (the vast majority of these will have been in the Birmingham area).

Since the end of the Phoenix fund Advantage West Midlands has provided support to CDFIs and other lenders under the Advantage Small Loan scheme and more recently the Small Business Loan programme. Both have drawn on ERDF funding as well as funds from AWM and local authorities. Between 1 April 2007 and 31 December 2009 Aston Reinvestment Trust (ART) and the Arrow Fund (two of the alternative lenders which have received funding under these programmes) made 235 loans totalling £3.574 million to businesses in Birmingham and Solihull.

To ask the Minister of State, Department for Business, Innovation and Skills what additional assistance his Department provided to small and medium-sized enterprises located in (a) Coventry and (b) the West Midlands during the recent recession. (325769)