Two funding schemes launched this week will aim to help small firms that are struggling due to a lack of support from banks and building societies.
Consumer finance specialist Hitachi Capital has announced a £25m lending pot set up specifically to provide asset-based loans from £2,500 to £15,000 for UK sole traders, including plumbers, builders and other small traders.
Repayment terms for the unsecured personal loans range from 12 to 60 months and loans above £5,000 will be charged at 8.9% APR. Applications can be made online and there are no fees.
Meanwhile, sole trader construction companies struggling to secure credit due to a lack of security or adequate credit history can also apply for loans of up to £25,000 at B&Q, Tradepoint and Screwfix stores under a government-backed pilot scheme.
The stores’ customers were only previously eligible for credit of up to £3,000, but owner Kingfisher Group is now able to support the additional lending thanks to a £30m government-backed guarantee. Existing trade customers will also be able to apply to extend their accounts for credit of up to £50,000.
The pilot is an adapted version of the government’s Enterprise Finance Guarantee scheme, set up to widen access to funding and provide alternatives to bank lending.
Business minister Michael Fallon will now be writing to other stores to offer them an opportunity to take part in the pilot scheme, he said: ”Builders and tradesmen are experiencing a real bottleneck when it comes to accessing credit, and projects are being held up unnecessarily. This pilot is an innovative attempt to make a real difference for the sector.”
Net lending by banks fell by £2.4bn in the final quarter of last year, compared with the previous three months, despite the introduction of the government’s Funding for Lending Scheme (FLS) in August, which was designed to encourage banks to lend more money, both to individuals and businesses, and boost the economy.
The Bank of England said the scheme, which by the end of 2012 had provided £14bn of funding to banks, had been slow to take off because banks had to scrutinise and approve loan applications.
Earlier this month, business secretary Vince Cable said the scheme may need to be “adapted” and would be speaking to the Bank of England, which operates the scheme, to see how it could be improved.
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What a load of tosh, the banks having to scrutinize loan applications as taking the time up. The banks have taken the governments money to swell their capital baseline, as a freebie, with little or no intention of passing the money on to small businesses. Ask the banks a direct question, who is getting the interest from the governments loan?