Insider Media Limited

Small businesses in the region are “confused” about the role of the government’s enterprise finance guarantee (EFG) scheme. That’s according to a Birmingham-based accountant who said that “mixed messages and poor marketing” were causing a disservice to the businesses which could benefit from the lending system.

Henry Briggs, senior partner of the Birmingham office of Haines Watts, said the EFG, which replaced the small firm’s loan guarantee scheme, was a “drop in the ocean” when it came to loaning cash.

The government-funded scheme has been responsible for lending more than £850m since its inception. Last November, the government announced it would inject a further £200m to the EFG facility over four years.

However, Briggs argued: “The government cut the guarantee it provides to the high street banks which mean that bank exposure to potential liabilities under the scheme would impact negatively on the ability of smaller banks to use it.

“Despite the scheme being available nationally, each participating bank has different rules and that, coupled with recent and seemingly conflicting announcements by government, is serving only to confuse businesses.”

About 40 lenders, including the main high street banks, offer loans through the EFG Scheme.

However, Briggs said that many businesses were loath to apply to banks for loans in the first place – partly because of conflicting stories about finance availability and the need for security.

He added: “Businesses need to know where they stand. There are further changes coming to the scheme in April 2011 as the government is working with the banks on a commercial scheme based on the EFG for businesses seeking working capital for exports.

"Whilst this is much needed and in line with their stated strategy for growth, it still leaves uncertainties for businesses about how and where they might access funds under the scheme.”