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Small Businesses Struggling to Secure Government Funding

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Small Businesses Struggling to Secure Government Funding

For many years, the Enterprise Finance Guarantee scheme (EFG), which is operated by the British Business Bank and backed by the Department for Business, Innovation, and Skills, has been a major source of funding for many SMEs looking for small business loans to facilitate growth and development within their industry. The scheme works with companies that have previously been declined small business loans by banks, offering a guarantee to the lender to increase the chance of approval.

Unfortunately, however, it appears that enterprises are finding it more and more difficult to secure small business loans through the EFG scheme. According to reports, 2030 small business loans were approved to SMEs in 2009 through the EFG scheme. Last year, that figure dropped to just 1835. The worry, of course, is that 99 percent of Britain’s businesses are considered to be SMEs by definition. If these businesses aren’t receiving small business loans which provide necessary funding for ongoing success, will we begin to notice a significant decline in our already vulnerable economy? Experts are already saying of the EFG that there is ‘no evidence it is really delivering what it set out to do’.

Small Business Loan Options for SMEs

The upside, of course, is that there are now more sources of financial assistance for small businesses than ever before, and these are options that can, in many cases, be more attractive and pose less financial risk than traditional small business loans from high street banks. Here are just some alternative finance options that are already proving to be suitable alternatives to traditional small business loans:

  • Peer-to-peer (P2P) business lending - small business loans offered by larger businesses
  • Invoice trading - sales of unpaid invoices resulting in instantaneous transfer of funds
  • Equity-based crowdfunding - sales of a percentage of the business to interested investors
  • Community share schemes - withdrawable share capital for benefit of local communities
  • Pension-led funding - utilisation of accumulated pension funds for business growth
  • Reward-based crowdfunding - ‘donations’ from investors with guarantee of agreed reward
  • Debt-based securities - Transfer of funds with non-collateralized debt obligation
  • Donation-based crowdfunding – donations for investors to specific projects or tasks

Small businesses who do not qualify for the EFG scheme, or who have struggled to secure a small business loan are being urged to consider further options to facilitate ongoing development. This includes alternative business loan comparison, as well as consideration of other grants and funding.