Funding of more than £700 million has been authorised for almost 3,000 UK small and medium-sized businesses from the European Investment Bank (EIB), according to the Treasury.
The Pre-Budget Report in 2008 saw the Chancellor announce that SMEs could benefit from up to £4 billion of European Investment Bank finance from 2008 to 2011.
During the first year of the scheme the target for UK banks was to secure £1 billion from the EIB for SMEs. This target was met and the banks have now secured £1.39 billion from the European Bank.
Ian Pearson, the Economic Secretary to the Treasury said he was overjoyed that SMEs are seeing the benefit of this finance. This makes up part of the Labour party's continued commitment to assist SMEs obtain access to the finance they require to move their businesses forward, which is essential if we want to achieve long-term growth.
He added his desire to urge all companies to contact their banks to ask whether they can benefit from this funding. One problem with this scheme however is that a lot of business owners were not aware of its existence and of the ones that had, the majority thought there was no point applying as they expected to be refused.
Meanwhile the RBS has promised £1bn of cut-price new loans to manufacturers to meet Government lending targets. Banks have been under pressure for refusing to offer credit to businesses at affordable rates and the Royal Bank says the new fund for manufacturers would offer fixed rates of 3.4% over 2 years and at 4.3% over 3 years.
Despite these measures there is still a feeling that the UK will become increasingly uncompetitive as fewer people are encouraged to start their own businesses.
As borrowing funds continues to be difficult, it is believed that owners of small businesses may find themselves seeking financial help from their family and friends, as well as resorting to extending their debt on credit cards. This depressing news emerged from a survey run by the FPB and Graydon UK, a commercial credit reference agency. Although the information was based on the 2009 survey, these issues are still applicable in 2010 so it is probable that the same trend will continue.
The survey found that 28% of people who own their own business thought they had no other option than to ask their loved ones for financial assistance because of the strict lending conditions laid down by the banks. Another 8% said they were using their credit cards.
40% of people who applied for bank loans from July to December 2009 had their application refused. 52% were refused loans specifically for their business and 28% had their request for an extension of their overdraft turned down.
Discussing the results of their survey, Graydon UK said this trend towards accessing personal finance is having a direct impact on the growing number of insolvencies during the latter half of 2009.
Phil Orford, from the FPB, said that the continuing lack of credit has led to more entrepreneurs looking elsewhere for other ways to raise finance. Some are even turning to friends and family and if that fails, applying for personal loans. The most recent insolvency figures demonstrate that this degree of individual risk is not sustainable.
© 2010 All rights reserved. Reproduction in
whole or in part without permission is prohibited.
Image: Facebook-Like:
Don't Give Up by quinn.anya