SMALL businesses who receive a loan via the British Business Bank’s Enterprise Finance Guarantee (EFG) scheme grow their turnover by 7.3 per cent more each year than businesses who do not get an EFG loan, new analysis has found.
Annual employment growth is also, on average, 6.6 per cent higher among businesses receiving an EFG loan, according to an independent review by London Economics released on Wednesday.
The policy and economics consultancy examined EFG loans from 2010/11 to 2012/13.
Overall, it calculated that the state-backed programme, which last month surpassed £3bn of loans, has boosted the British economy by more than £415m.
The EFG programme, launched in 2009, provides accredited lenders with a government-backed guarantee for 75 per cent of the loan value, between £1,000 and £1.2m, for smaller businesses who would have, or already have, been turned down for a loan due to insufficient security.
The independent report estimates the chances of survival for start-ups who received an EFG loan were 1.2 per cent higher than non-beneficiaries.
They were more likely to have introduced new or improved products and services.
More than 25 per cent of the loans have been issued to start-ups with fewer than 10 employees.
John Carmody, director of guarantee and wholesale solutions at the British Business Bank, said the findings show the “real difference” the EFG programme is making to smaller businesses across the UK and to the wider economy.
“We look forward to working closely with our expanding network of accredited lenders to build the programme’s impact, helping smaller businesses get the vital finance they need,” he added.
There are around 40 accredited lenders on the scheme, including Newable, Santander and Metro Bank.
There are currently no peer-to-peer lenders, although they are welcome to apply.
RateSetter’s head of commercial finance Paul Marston previously expressed an interest in the programme to Peer2Peer Finance News.
The scheme supports a wide range of business finance products, including term loans, overdrafts, invoice finance and asset finance facilities.
Finance terms are from three months up to 10 years for term loans and asset finance, and up to three years for revolving facilities and invoice finance.
Wholesale and retail trade, alongside motor vehicle repair, are the most popular sectors lent to via the scheme, followed by manufacturing.