Lines of credit pledged by the Government to support small and medium businesses are not being made available by banks, a survey has found. A financial support package for SMBs was launched by Business Secretary Lord Mandelson earlier this month (16 January).
It was intended to help businesses, including waste and recycling, address cash flow, credit and investment needs.
But the Federation of Small Businesses warned that Government economic stimulus was not working. Its research found that VAT cuts, bank lending guarantees and pledges on payment practices had had no impact. Its poll revealed that only 8 per cent of small businesses said their banks were offering the Governments Enterprise Finance Guarantee. Meanwhile more than half (53 per cent) doubted that the Government scheme would make banks start lending again.
A fifth of small businesses said they were still waiting for more than 10 days to be paid for public sector work, despite Government promises to help speed up payments.
Source of credit
The figures also showed that small businesses are increasingly being used as a source of credit in the commercial world with over a third (36 per cent) waiting longer for payments from the private sector.
FSB national chairman John Wright said: "The Government must use its meetings with the banks to monitor the guarantee scheme and assess why loans are still being refused, while both Government and bank branch managers must do more to promote these funds.
Small business Any Junk? founder Jason Mohr commented: I think when you get an announcement like this from the Government; its on the premise that it will be applicable for stable businesses. Theres a large element of people going bust that will apply for it. But they shouldnt get it because they wouldnt have been eligible for it before. It would be like throwing good money after bad and banks are very cautious.
But it should be an option for good companies that are getting squeezed by customers. For example when customers say they want to extend their payment terms from 30 to 60 days as this causes a problem with cash flow.
The Government financial package included:
* A £10bn Working Capital Scheme, securing up to £20bn of short term bank lending to companies with a turnover of up to £500m
* An Enterprise Finance Guarantee Scheme, securing up to £1.3bn of
additional bank loans to small firms with a turnover of up to £25m
* A £75m Capital for Enterprise Fund to invest in small businesses which need equity.