With estimates that as many as 120 small businesses a day are now going under, the government has been desperately trying to persuade banks to lend money to firms that are viable.
In January it launched a £1.3bn lending scheme which would offer banks a tax payer guarantee for 75% of the value of certain loans if a firm defaulted.
But many small businesses are unaware the scheme exists, and of those that are, there are complaints it is not delivering what it promised.
We asked for your comments, a selection of which are below. This debate is now closed.
MOST RECENT COMMENTS:
We've approached our own bank and two others with respect to the Enterprise Guarantee Scheme. They all give different answers and none appear to be "keen" to progress the discussion. We are one of the few companies that have successfully borrowed and then paid back loan capital under the old Small Firms Loan Guarantee scheme but even so, this seems to count for nothing. One of the banks even quoted a fixed rate interest deal on the scheme of 17% plus insistance that 100% of the loan was covered by personal guarantees. The banks were never keen to loan under the SFLG scheme and this new name and higher amount deal feels like it will go the same way. I think the phrase is "cosmetic tinkering".
Nick John, Winchester
The scheme is not designed to absolve the owner of a failed small business from any losses. It is designed to make the banks more willing to lend in the first place, because they have a back-up guarantee over and above the assets of the small business owner. If the government was the first provider of guarantees to the banks, ie ahead of the business owners themselves, the potential for fraud on the taxpayer would be immense. The challenge we face at the moment is that banks are so scared of losing money they will not lend even to good business propositions. The scheme is designed to make them a little less reluctant to lend. That in itself will benefit the small business owners who have a good business plan and who need finance which they otherwise are not getting. If the banks were more honest, and the government did not try to spin every single policy they ever have, we might see this scheme for what it is - a help to the banks so that they in turn are less unwilling to help businesses. No more, no less.
John, New Malden
The goverment has done nothing so far to help small businesses. I can tell you this because I own one of these "small businesses" that the goverment keeps saying it is hell-bent on helping. I, like many other company directors in this country, have had no option but to secure a loan personally because there has been no other option. It is the typical smoke and mirrors that I have come to expect from our goverment.
Carl Sharkey, Bradford
I have written to several government ministers including the PM and the chancellor voicing my angst at the lack of actual money on offer from the banks. It is announced all the time in the media that these loans are available but they are just not out there.
Geraldine Russell, Blairgowrie
I don't know where Shriti Vadera is getting his information from. This week I have spoken to every bank listed who offers this scheme, so far out of 12 banks, only one has been able to deal with my request. The others either don't know about it, don't have anyone I can talk to and one even rejected my enquiry based on a message left on his voicemail. The scheme is nothing but smoke and mirrors.
I am a retired solicitor and throughout my career I regularly advised on bank guarantees. The bank representative and Lady Vadera were clearly being evasive in answering Paul Lewis's question as to whether a director could lose his/her home in providing a 100% guarantee. The correct answer would appear to be - the bank will not take a charge on the property, but if the director is called upon to pay and does not have other assets sufficient to repay the loan, interest and charges, the bank can, and almost certainly will, obtain a charging order on the house. That would be followed by an application for an order for sale. It is clear that this scheme is not really designed to give help to small business, but is merely a final fall back guarantee to the bank if the customer does not have the means to repay.
John H Smith, London
As a business employing 10 people with a guarantee to NatWest and a profitable business, we have a good new customer and I will have to provide all my personal assets as security before we can apply for the new loan scheme to help finance working capital. So where is the help in that for a business? The scheme has been neutered by the banks because there isn't any government guarantee if I have to provide 100%.
David Lea Wilson, Llanfairpwll
The question I would have loved Paul to ask the minister responsible for the small loans guarantee scheme or the chief executive of Barclays or any of the banks is whether the directors of the banks would be required to provide personal guarantees for any losses suffered against the banks' insurance scheme which has recently been set up, or for that matter, for the troubled assets recently swapped for treasury bonds. This would seem fair if the banks are requiring personal guarantees from the directors for small business loans as, I quote the director put up by Barclays, "these are potentially impaired loans". I think not.
Rog Caygill, Narbeth
Despite the bank assurance that a personal guarantee would not be pursued if there were a problem and the borrower defaulted, then the bank could make the borrower bankrupt and register with the receiver as a secured creditor under the personal guarantee. The received would not have any constraints in chasing all the borrowers assets including his share of the family home.
Ian Green, Stockport
Yes, of course some degree of personal guarantee should be made. Why should we, the taxpayer, guarantee all the risk? I am fed up of seeing companies go into administration, the management immediately buy back the business from the administrator, and they walk away from their debt.
I am very frustrated at having missed the Small Firms Loans Guarantee Scheme by a couple of weeks when it was replaced with the EFG Scheme in January. The new scheme seemed ideal for our start-up business, but after wasting time on application paperwork we've either been asked to personally guarantee the loan or hurdles have been put in our way as your report suggested. There also appears to be a wide interpretation difference between banks. There seems little difference between this and a secured loan, with the government merely using this scheme as political spin to try to show how it is helping small businesses.
As a manager of a small business, there has been a significant loss of work available. We sent our staff through a lot of training and spent about £10,000 over the last year and a half. We have had to let one young employee go even though we had trained him. We would like to apply for a loan without liability to the directors as they are about to retire. We just asked the bank for a loan and they will only loan at 7% above base rate.
Tania Jackson, London
If they think a venture is too risky to risk their own money, then why is ok to off-load the risk? Surely this only encourages reckless business decisions. We need sound businesses working not risky ones !
It is entirely appropriate for the directors of businesses seeking finance under this scheme to be required to provide personal guarantees, i.e. their undertaking that they will repay monies borrowed. As a taxpayer, I want these people to bear the risk of repaying what is due before the government's (i.e. my) guarantee is called upon. As the man from Barclays said, the guarantee does not provide the bank with security over and the right to seize any specific assets, directors' homes or otherwise. It is merely, as would be expected in "normal" times, an acknowledgement of liability. If the worst did happen and the bank had to ask directors to meet their obligations, they would be in no worse position than if they had borrowed without the extra government support.
It was always the case under the old Small Firms Loan Guarantee Scheme that the proprietors' tangible security had to be fully committed before the business became eligible for a guarantee. The declared intention of that scheme was to provide security (to about 70%) when no other was available, and the business was otherwise viable; it was little used because the banks were still left with an unsecured portion, and it was rare that applicant businesses were strong enough to justify an unsecured lending. As I understand it the rules of the new scheme are broadly similar, and are not unjustified; it seems only reasonable that the directors should be fully committed before the taxpayer steps in, but equally it would be folly to launch a surge of unsecured lending to declining businesses in a recession.
David Todd, London