FSB: Banks have run out of excuses as Government announces £1bn fund for small firms

Wednesday, 14 January 2009 12:00 AM

The Federation of Small Businesses, (FSB), today welcomed a new £1.3 billion fund for small firms - much needed support for small firms that the FSB has been campaigning for since October.

The Enterprise Finance Guarantee, which the FSB will be actively promoting to its 215,000 members, should compel banks to start lending again and help viable small businesses access finance which they desperately need to maintain cash flow, grow their business and retain their staff.

A third of FSB members have reported problems accessing finance. The latest figures from the banks, which support FSB findings, show that small businesses were forced to dip into their savings to the tune of around £900 million, while overdrafts were reduced by £100 million during October and November last year. This is evidence that the new fund has been a long time coming for those small firms struggling to survive. The FSB will be calling for it to be topped up as small firms use it to grow and thrive.

FSB National Chairman John Wright said:

"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."

ENDS

Notes to Editors

1. The FSB is Britain's leading business organisation with over 215,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at http://www.fsb.org.uk

2. Today's announcements follow pledges made in November's Pre-Budget Report. It includes;

- An Enterprise Finance Guarantee goes live today (14 January). This 75% guarantee for loans with a 1.5% premium will support bank lending, of 3 months to 10 year maturity, to businesses with a turnover of up to £25million who are currently not easily able to access the finance they need. This will enable them to secure loans of between £1,000 and £1m through the government guarantee, available up to 31 March 2010. The guarantee will be available through the following high street banks from today - Barclays, Clydesdale/Yorkshire Bank, HBOS, HSBC, Lloyds TSB, RBS/Natwest and Northern Bank. It will become available from other lenders if they wish to apply.
- Working Capital Scheme- working capital guarantees for all firms of turnover of up to £500m. Guarantees of up to £10bn for up to 50% of the working capital on a £20bn portfolio of loans.
- Capital for Enterprise Fund- £75 million of equity, made up £50m of Government funds and an additional £25 million from Barclays, HSBC, Lloyds TSB and RBS. Provide equity and quasi equity of £250,000 to £2 million for companies under the European Union SME definition, i.e. of turnover of up to ?50 million, who have viable business models and growth potential in need of long term capital.
- For more information visit www.businesslink.gov.uk

Contacts:

Stephen Alambritis: 020 7592 8112 / 07788 422155
Sophie Kummer: 020 7592 8128 / 07917628998
Prue Watson: 020 7592 8121 / 07825 125695
Marc Shoffman: 020 7592 8113 / 07595 067068

For regional FSB contacts please go to www.fsb.org.uk/regions

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