Positive review of Enterprise Finance Guarantee

The British Business Bank’s flagship Enterprise Finance Guarantee (EFG) programme, which last month surpassed £3bn of loans supported since its inception, has been found to generate £415m of economic benefits, according to a positive review by London Economics, one of Europe’s leading specialist policy and economics consultancies.

The independent review found that smaller businesses receiving an EFG loan saw higher average growth in turnover (by 7.3% per year) and staff numbers (by 6.6% per year) compared to businesses who didn’t receive an EFG loan. The review examined EFG loans from 2010/11 to 2012/13.

The Enterprise Finance Guarantee, launched in 2009, provides accredited lenders with a Government-backed guarantee for 75% of the loan value, between £1,000 and £1.2 million, for smaller businesses who would have, or already have, been turned down for a loan or other form of debt finance, due to insufficient security.

The programme has supported tens of thousands of smaller businesses who have a sound borrowing proposal and robust business plan to access finance for which they may otherwise have been ineligible.

Other key findings of today’s evaluation include:

  • Over 25 per cent of guaranteed loans under the EFG scheme were issued to start-ups of under 10 employees.
  • The EFG programme’s five-year economic benefit-to-cost ratios – showing the overall benefit to the economy – grew year on year throughout the period examined in the report, with a ratio of 11.3 in the final year (2012/13).
  • Access to finance through the EFG programme was crucial for helping new business survive – start-up EFG recipient’s survival probabilities were 1.2% higher than non-beneficiaries.
  • EFG beneficiary firms were more likely to have introduced new or improved products and services than non-beneficiaries.

This independent evaluation provides the British Business Bank with a further robust evidence base on the EFG programme, particularly in terms of value for money and additionality assessments, upon which to continue to build the programme. The British Business Bank is committed to setting the global standard for independent assessment of national credit guarantee schemes such as the EFG.

The review’s methodological approach and the final report itself have been reviewed by an independent Expert Peer Review Group for Evaluations and received the highest possible score for this type of study.

John Carmody, Director, Guarantee and Wholesale Solutions, said: “We welcome today’s findings, particularly in light of our recent achievement in passing the £3bn EFG funding milestone. We are committed to ensuring that, as the UK’s national economic development bank, we are setting the standard for independent evaluation of our programmes. That’s why we’ve been pleased to work with London Economics to publish today’s findings, which show the real difference our national EFG programme is making to smaller businesses right across the UK, and to the wider economy.

“We look forward to working closely with our expanding network of accredited lenders to build the programme’s impact, helping smaller businesses get the vital finance they need.”

For more information download the full report.