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EFG Loan Review Pending?
Cumbria-based firm of chartered accountants, tax and business advisors, Lamont Pridmore, have commented on a clause hidden deep in the coalition programme.
The Government's coalition programme, released last week, includes a proposal to consider a major loan guarantee scheme for SMEs. The clause in the coalition programme states:
"We will develop effective proposals to ensure the flow of credit to viable SMEs. This will include consideration of both a major loan guarantee scheme and the use of net lending targets for the nationalised banks".
This was welcomed by Graham Lamont Chief Executive of Lamont Pridmore. He said: "I do not believe the banks are lending sufficient EFG loans. The scheme clearly is not meeting the needs of SMEs, nor is the scheme achieving the purpose for which it was created. The levels of reported lending show that the banks are falling woefully short of their targets.
“In our experience, banks don't like using these loans, and therefore businesses still struggle to obtain them. The banks are restricted heavily on calling in the security provided by the Government, so internally only assume 25% cover, rather than the headline 75% cover provided in the legislation.
“And despite the publicity machine from the last government purporting to provide this government initiative in order to support SMEs, a business owner still has to provide all his/her security (corporate and personal) to the lender, if they are to be eligible for this EFG. So in the event that the business does default on its facilities, the business owner will most likely be facing bankruptcy, as the banks are required to call on all the security available to them, before using the Government’s backing.
“I therefore welcome a wholesale review of SFLGS/EFG or any other guaranteed loan that will be available for SMEs in this still, very difficult trading climate."
