Lending under the coalition’s flagship small business lending initiative has declined by more than 40% in just 12 months, according to a new report.
The study, carried out by financial services company Syscap, found that the government made £433m available under the Enterprise Finance Guarantee (EFG) scheme over the 12 months to July 2011.
During the previous year, a total of £742m was made available under the auspices of the scheme – which guarantees 75% of the value of a loan to businesses turning over £25m or less.
Furthermore, the researchers found that during the most recent quarter, from April to June 2011, only £93.1m was offered to small firms – little more than a third of the figure reached in the second quarter of 2009.
The government is likely to fall short of its additional lending target if the current trend continues, and those behind the report are now advocating urgent action.
Philip White, the chief executive of Syscap, suggested that the scheme should be extended to include lease-based finance arrangements, which are not currently covered by its terms.
He added: "With economic performance in the past two quarters looking lacklustre and the ongoing eurozone crisis continuing to erode business confidence, an expansion of lending under the EFG scheme is urgently needed to help put the economy and job-creation firmly back on the growth track."