Government loan scheme: the reaction

“We are pleased to finally see the introduction of this fund which mirrors the small business survival scheme that we urged the government to introduce before the Pre-Budget Report in November. It is sad to see that since we proposed our package in October, small business closures have risen to around 85 a day, meaning over 6,000 have closed while waiting for this fund. “The onus is now on bank branch managers to actively promote this money to its small business customers to ensure their survival and the revival of the economy. The banks now have no excuses and we will be encouraging our members to apply for these funds while keeping a beady eye on the banks through our bank watch scheme to ensure that they are lending actively and fairly.” FSB national chairman John Wright.

"It is good to see that larger entrepreneurial and innovative companies are being targeted as well as smaller businesses. The recovery of these companies could have a more immediate impact on the economy. The government is likely to find that business will reserve judgement on the measures until they feel it working in practice.” Mary Monfries, PricewaterhouseCoopers head of tax services for entrepreneurs, private companies and private clients.

Monfries on…Enterprise finance guarantee scheme:

“This secures additional bank loans to small firms with a turnover of up to £25m but will it be targeted to innovation? The announcement says this will cover loans up to £1m, but this seems a low sum to fully fund innovation."

Capital for enterprise fund:

“Debt for equity swap for small businesses – at first blush a £75m fund looks fairly small. This is targeted at ‘viable companies which have high levels of existing debt’.  Where does that leave those who haven’t got high existing debt but still can’t raise the capital they need?”

Working capital scheme:

“Also good to see is the intention to target companies struggling ‘not because of any failure in their business but due to the tougher credit conditions.’ It looks like banks will pay a higher fee to BERR if the loans they submit are higher risk, but otherwise inference would be that banks will seek government guarantees on their riskier loans. The deal is that banks will make commitments to use the freed up capital to increase their fresh lending to businesses with turnover up to £500m but we need to hear from government about how it will ensure this happens. BERR has made a clear statement that the Working Capital Scheme is subject to EU State Aid Clearance – how long will that take and will the scheme start pending clearance?”

"HSBC has very much remained open for business through this credit crunch, announcing our own new $5 billion global SME fund last year (with £1 billion earmarked for UK business) and a £15 billion pledge for UK mortgage customers. We welcome the government’s Working Capital Guarantee Scheme as another valuable step in efforts to support British business." HSBC managing director of UK banking Paul Thurston.

"This package is certainly welcome and is likely to address some of the credit restrictions that our members are facing. However, it must be followed up by longer-term measures to support small businesses and stimulate the economy, including tax cuts and similar strategies to boost struggling sectors such as the housing and automotive industries."

"With the Government underwriting bank lending to this level, more businesses considered to be of higher risk will still be able to secure much-needed finance if they can prove they are viable concerns, but it is important to note that many vulnerable small firms will continue to face difficulties when applying for loans and overdrafts in the coming months. This package is a welcome step, but only the next step in a longer process of freeing up credit and stimulating the economy." FPB chief executive Phil Orford.

Related articlesNew finance scheme to provide "real help" for SMEsGovernment aid plan for businesses unveiled"How do I keep my bank facilities?"Picture source 

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