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February 22, 2013

EFG scheme adds £1.1billion to UK economy

Over 10,000 businesses have been helped by the government's Enterprise Finance Guarantee Scheme (EFG) since May 2010, according to independent research by Durham Business School.

Under the scheme, the government acts as guarantor on 75% of individual bank loans – these range between £1,000 and £1m and are provided to small and medium-sized businesses that do not have the adequate security for a normal commercial loan.

The study has found that the EFG scheme has added £1.1 billion to the economy, and that for every £1 invested it has helped deliver £33.50. The research also found that it has created 6,500 jobs, and safeguarded more than 12,000.

Business minister, Michael Fallon, is now calling on banks to increase their lending through this scheme. He said: "Clearly the demand is there for this type of financial support so we must start to see an increase in take-up. I have already begun publishing EFG lending by each individual bank, because businesses should know which bank they are best off approaching and I will continue holding the banks to account until lending levels improve."

Other government schemes for entrepreneurs and start-ups looking to access finance include the Seed Enterprise Investment Scheme (SEIS) and Start Up Loans.

Start Up Loans, the £112 million government scheme created to help young people between the ages of 18 and 30 start their own business, has supported its 1,000th entrepreneur this month. Charles De-Souza secured £1,500 to grow his events management business.

SEIS helps early-stage companies raise finance by offering a range of tax reliefs to encourage individual investors to buy shares. It combines 50% income tax relief on the cost of these shares and a capital gains tax exemption from disposal of these shares.