EFG and help for small businesses

Alan_M_2

Article today in the Daily Mail, this has become a pet peeve of mine:-

http://www.dailymail.co.uk/news/article-1161897/Rescue-package-What-rescue-package-Why-Gordon-Browns-plan-help-small-businesses-survive-isnt-working.html

Snippety snip...
Under the scheme, which is open to businesses with a turnover of up to £25 million, entrepreneurs are able to borrow between £1,000 and £1 million repayable over ten years. However, the scheme is administered by the banks, which provide a quarter of the loan, with the Government guaranteeing the rest of the sum.
Mr Peters was faced with the sort of cashflow problems encountered by most businesses. The banks which had once been so enthusiastic about his business refused to lend, so he applied for an £80,000 loan under the Enterprise Finance Guarantee Scheme.
He was turned down - despite seeming to be exactly the sort of business it was designed to help. Why? In his case, he was told that he had too many assets to qualify.
His family home would have to be sold first to prop up the business. Incredibly, one banker admitted that a foreigner without a home would be allowed to borrow £1 million because he had no assets. But a Briton with a home would not be allowed to do so.


This is also the attitude I've found when approaching banks. Lets for a moment remove the issue of the business being viable or not, I actually want to address the scheme itself and what is being offered and the circular arguments that it creates.


Firstly your business must be viable...that's a given so we will assume that is the case...however you must be profitable and viable.....therefore you will have assets (these can be personal, business or any assets whatsoever)...and here is circular argument number one, to qualify for the EFG scheme you must have no assets or not be able to fund it yourself.

Secondly, the scheme is to ease cashflow by turning existing overdrafts into term loans and leaving the existing overdraft in place, however the EFG is not designed to replace existing lending it is an addition...however that additional lending would need securing...see circular argument number one.

One bank I approached said they would match whatever I was personally prepared to invest in the business (I'm happy to do this).....which they then classed as an asset and informed me as I had assets I would not qualify for the EFG....Basically, if you own a business and you own your own home you cannot borrow under the EFG.

However, the overlying problem for all lending under this scheme is it is "At the banks discretion" there is no compulsion to lend whatsoever......that's all taxpayers money.....where exactly has it gone or is it going?

Is my MP interested...of course not, He doesn't give a hoot.