Small Business Finance Scheme??

26th November 2008

It has been my view for some time that in all this financial turmoil what businesses really need is help to ensure that they can maintain if not extend their funding facilities.

Often it is not the need to throw new money at the situation, but to simply secure what is already there. If bankers and other lenders are taking a fresh look at their portfolios and their definition of risk, then there is a real chance that they may withdraw or reduce facilities that were "OK" only a few months ago.

One reason why this might occur is lack of collateral or security (I accept there may be others!). If funding is supported by certain assets these may now be worth less than they were or are considered more risky.

What is surely needed then is Government intervention to provide the support in providing some sort of guarantee to give the lender the comfort they are looking for? Well, it would appear that perhaps that is coming ... but we cannot be sure! In the Pre-Budget Report Alistair Darling announced a "Small Business Finance Scheme" - a temporary guarantee scheme of up to £1 billion to be introduced early in 2009. Problem is, unless I am going blind, I cannot find any further information about this anywhere!

I hope that it is not just an extension of the Small Firms Loan Guarantee Scheme (SFLGS) which really does not work too well and certainly will not solve the issues businesses are likely to face in the coming months. For starters it must cover existing lending!

If anyone can shed some more light on this I would be very interested to hear about it!

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