The argument that the government’s lending programme for SMEs should be extended to asset finance has been made again by a leasing company, in the wake of figures showing a sharp drop in lending under the scheme.
Lending under the Enterprise Finance Guarantee (EFG) programme has fallen 42% between June 2010 and June 2011, according to data from the Department for Business Innovation and Skills (BIS).
Latest lending figures show that between April and June 2011, the EFG offered to guarantee 919 loans worth £93.1 million to small businesses, down from a peak of £254.9 in same quarter of 2009.
If that trend continues, the Government is unlikely to reach the £600 million allocated for additional lending under the scheme between 1 April 2011 and 31 March 2012, IT leasing company Syscap has stated.
The EFG guarantees various forms of finance including invoice finance, new loans, and re-financing of existing loans, but excludes leasing.
The EFG’s exclusion of leasing finance may be putting an artificial curb on demand for EFG loans, Syscap said, adding that businesses may be postponing capital investment due a shortage of finance.
Philip White, chief executive of Syscap, said: “Making lease finance more readily available would mean businesses can make the investments they need now rather than postponing them indefinitely. This would bring an immediate boost to the economy and also have a longer-term impact on the competitiveness of UK businesses.”
A BIS spokesman said that EFG-backed lending in 2009-10 was “exceptional” considering that it coincided with the height of the recession when banks were highly reluctant to lend.
The EFG, which began in Janauary 2009, is designed to enable additional bank lending to “viable” SMEs with a turnover of less than £25m that lack collateral to secure a normal commercial loan.
The government guarantees 75% of a loan. The scheme will continue until 2014-15, and will provide up to £600m of additional lending to around 6,000 SMEs in 2011-12 and, subject to demand, over £2 billion in total over the next 4 years, BIS said.