|Chairman of FSB Merseyside, West Cheshire and Wigan comments on expansion of start-up loans for young entrepreneurs
John Allan welcomes move but urges government to focus on ‘broken relationship’ between small businesses and banks following declining lending figures
John Allan, Chairman of FSB Merseyside, West Cheshire and Wigan and national Vice Chairman, has commented on today’s £30 million boost to start-up loans for young entrepreneurs.
Under the scheme, when a business plan is approved budding entrepreneurs are able to access a low-interest loan - typically valued at approximately £2,500 - with a repayment period of up to five years.
According to a government statement more than 3,000 people have applied or registered an interest in a start-up loan to date.
In the three months that the scheme has been running more than £1.5 million in loans have been approved, allowing 460 new businesses to get off the ground. Around 100 new businesses a week are expected to reach approval stage in January, and thousands more in the months ahead.
However, in December 2012 official figures showed that small business lending under the Government’s flagship scheme, the Enterprise Finance Guarantee (EFG), fell by around £160 million year-on-year, from around £461 million in 20110/11 to £301 million in 2011/12.
In September 2012 the Business Minister, Michael Fallon, wrote to the Chief Executives of the five main high street banks to encourage them to increase their use of the scheme, after the data showed that significantly fewer loans had been granted in 2012 compared to the previous year. In 2010/11 the figure was 4,685 while 2011/12 saw just 2,999 EFG loans to small business owners.
Mr Allan said: “By increasing the pot for start-up loans by £30 million to £110 million over the next three years, and the age range of those eligible from 24 to 30 in order to meet demand, the Government is moving in the right direction in addressing the gap in small business finance.
“But it needs to pick up the pace considerably and not lose focus on rebuilding the broken relationship between small businesses and banks.
“The Government is indeed acting on a number of fronts but failed initiatives, including Project Merlin’s lending targets, combined with the financial scandals of mis-selling and the manipulation of the inter-bank lending rate, have fuelled scepticism and a sense of alienation among small business owners.
“With the new Funding for Lending and Business Bank schemes in mind, 2013 must bring real results in reducing the cost of lending and boosting competition in order to free firms to create jobs and drive economic growth.
“Fewer than one in 10 firms responding to the FSB’s quarter four ‘Voice of Small Business’ index considered credit to be easily available. That is simply not good enough.”