UK independent finance provider Syscap has called on the government to open up lending schemes such as Enterprise Finance Guarantee (EFG) and Funding for Lending (FLS) to non-bank asset finance providers to boost small business lending.
The specialist IT lender pointed to the continued fall in EFG lending, despite the government exposing the programme to larger businesses in January, as evidence the scheme was failing.
The value of loans offered by the scheme in the first six months of 2012 fell 10% year-on-year and was also down on the previous six months.
Syscap’s chief executive Philip White said the lack of government initiatives aimed at increasing lending to smaller businesses was proof that the government has “all but given up”.
White suggested the problem could be resolved by offering providers of asset finance to SMEs the same limited guarantees it offers to banks under the EFG or the low cost funding being provided to banks under the FLS.
White said: “It seems like all the focus has been placed on the Funding for Lending scheme but of course that does not require banks to increase lending to small businesses. Nor does the Funding for Lending scheme incentivise banks to lend to smaller businesses or even bother setting targets for lending to small businesses.”
“We think increasing funding to SMEs is too important a problem for the government to turn its back on. They need to start looking at a broader range of options – for example incentivise funding for small businesses through leasing. Leasing is the one of the few areas of the small business finance market that is growing,” he added.
White highlighted data from the Finance & Leasing Association which showed asset finance businesses has increased 12% over the last 12 months to £20.5bn, while bank lending has fallen 3% over the same period.
White’s comments echo those of ING Lease UK chief executive Chris Stamper who, in a letter to Leasing Life, welcomed the end of the small business-specific National Loan Guarantee Scheme but said the FLS would need to be open to all lenders to better stimulate lending.