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Government funding dips.

Small and Medium enterprise funding provided by the Government’s Enterprise Finance Guarantee (EFG) scheme has fallen over the last year, says IT finance provider, Syscap.

The value of loans covered by the funding programmes fell to £433 million in the 12 months to the end of June 2011, down from £742 million during the previous twelve month period.

The dip appears to be gathering pace as just £93 million EFG loans were offered during the most recent quarter compared to a higher rate in previous quarters.

There is £600 million allocated for SME lending under the scheme between 1st April 2011 and 31st March 2012, the figures look sad in terms of targets, and Syscap argues that the exclusion of leasing finance is the problem.

Another form of asset finance, invoice financing, is allowed under the EFG but leasing remains excluded, despite being regarded an important source of funding for SMEs.

Syscap’s chief executive, Philip White, comments: “With economic performance in the last two quarters looking lacklustre and the on-going Eurozone crisis continuing to erode business confidence, an expansion of lending under the EFG scheme is urgently needed to help put the economy and job creation firmly back on the growth track.”

He adds: “Since the banking crisis, good progress has been made in attracting funders back to the leasing market, but allowing lease finance into the EFG scheme would give a major boost to the availability and affordability of leasing just when it is most needed.”

Under the scheme, the Government will guarantee 75% of the value of lending in an individual loan to a business with a turnover of less than £25 million, perfect for the medium size companies.

However, the guarantee is capped at 9.225% of total funds lent out by each finance provider.

Obviously there are a number of other ways of funding SME’s  including Factoring, Selective Factoring and invoice discounting.

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