SMALL FIRMS LOAN GUARANTEE SCHEME (Hansard, 14 December 1992)

§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Baroness Denton of Wakefield)

My right honourable friend the President of the Board of Trade is today announcing a number of changes to the Small Firms Loan Guarantee Scheme which will focus lending more closely on those businesses which will most benefit from this type of support.

Firstly, in order to give greater assistance to businesses in our inner cities, my right honourable friend will be extending and further enhancing the scheme's inner city variant, which already provides additional benefits over the main scheme. From April next year the special terms will be available to eligible small firms in successful City Challenge areas as well as those in Inner City Task Force areas. My right honourable friend has also been able to announce further help for firms in such areas. The premium paid by firms to the Government for the guarantee will be halved from the current level of 2 per cent. of the guaranteed portion of the loan to 1 per cent.

These changes will extend the special terms to many more potential borrowers and will enable them to borrow more cheaply.

Two further changes will be made to the scheme overall, also to take effect from April next year. These are:

(i) the introduction of a minimum lending level of £5,000 for support under the scheme, except within those areas eligible for the special inner city terms;
(ii) the exclusion of a number of local services where the support for firms has previously been largely at the expense of displacement of business from other firms in the locality. The sectors affected are retailing, hairdressing, taxi and cab hire and motor vehicle repair.

In the longer term my right honourable friend will be exploring how the scheme could further be improved by linking loans with appropriate help, advice and training in business skills.

These changes will help to ensure that Government support under the scheme, which amounts to £177 million since it began in 1981 and which has enabled £980 million to be lent to over 32,000 small firms, remains focused on those areas where the maximum benefit can be obtained for businesses and the taxpayer.