To ask the Minister of State, Department for Business, Innovation and Skills what recent assessment he has made of the effectiveness of the small firms loan guarantee scheme.

holding answer 30 March 2010

In January 2010, the Department published the Economic Evaluation of the Small Firms Loan Guarantee undertaken by the Institute of Employment Studies.

This study rigorously tested the effectiveness and value for money of SFLG and concludes that the basic rationale for SFLG is supported and that it appears to be a cost-effective way of supporting additional economic activity in the small business sector.

More specifically, the majority (81 per cent.) of SFLG recipients receive SFLG on their first loan application. For a majority (76 per cent.) of SFLG recipients, there were no alternative sources of finance available to them.

This is confirmed by 79 per cent. of SFLG recipients reporting the bank would probably, or definitely not, have given them a loan without SFLG. Just under half (49 per cent.) of businesses would definitely, or probably not, have proceeded with their project without SFLG.

A growth in sales, jobs and exports is attributable to SFLG supported lending within the first two years of the loan. The 3,100 SFLG supported businesses in 2006 have created between 3,550 to 6,340 additional jobs in the two years following receipt of the loan, created between £75 million and £150 million additional sales over two years; and were responsible for £33 million exports per annum.

Just within two years of receiving the loan the benefits of the scheme are outweighing the costs.

SFLG appears to be a particularly cost effective way of creating additional employment.

The full report is available via the BIS website:

http://www.bis.gov.uk/files/file54112.doc

The Small Firms Loan Guarantee was replaced by the Enterprise Finance Guarantee in January 2009.