The CEF is an equity fund, not a loan, targeted at businesses with growth potential that need long-term capital – it’s not a rescue raft for drowning companies. The government has stumped up £50m towards the fund, while Barclays, HSBC, Lloyds TSB and RBS have contributed an additional £25m.
When we questioned the Department for Business, Enterprise & Regulatory Reform (BERR) about the scheme, we were told that two fund managers had been appointed to handle applications (small businesses are eligible if they are UK domiciled, have a turnover of up to €50m, and have less than 250 employees), and that a maximum of £2m was available per firm. “This is a carefully targeted fund, aimed at providing equity finance for entrepreneurs whose borrowing capacity with commercial lenders has been exhausted,” they explained. “It’s not intended to be widely dispersed to a large number of companies.”
That’s must be the understatement of the year. In the six months since it was announced, guess how many entrepreneurs have actually received funds. Go on, guess.
Zero. Our insiders at the House of Commons told us that, by the end of March 2009, there had been 1,013 inquires to the CEF registration helpline. Of 253 businesses that registered their interest, 51 had met the eligibility criteria and submitted their business plans and accounts.
Just six cash offers have apparently been made, worth just over £6m. That’s eight per cent of the total fund. Pretty abysmal. BERR’s excuse is that “it has taken time to design the management and delivery features, appoint the fund managers, and appraise interest and applications”, and that “due diligence on bids can take several weeks”.
The public has slammed the scheme. “On the face of it, it’ll get a nice press release and make the government look good in the papers, but this scheme has no more credibility than the 2.5 per cent cut in VAT,” says one commentator on the Guardian’s website. ”
Shadow Business Minister Mark Prisk has also hit out at the package, claiming it’s “too complex and small to make a real difference to access to finance”. He continues: “Help with finance for growth is important, but it needs to be simple to understand, easy to apply and the decision-making needs to be clear and timely.”
Mandelson, take note.