ROYAL Bank of Scotland has agreed to lend small and medium sized businesses almost £63m through the UK Government's Enterprise Finance Guarantee (EFG) scheme, which was launched in mid-January.
It expects volumes to increase quickly as more companies learn how the scheme works.
RBS recently had a record week for deals when it gave the go-ahead to £10m of EFG lending. It described this milestone as proof that demand is rising.
Some ot
her banks, including Lloyds Banking Group, refused to disclose figures for the EFG scheme. Lloyds claimed to be "one of the most active participants in the scheme".
The Government said a total of £30m of guaranteed loans are being approved each week by banks. It has hit back at criticism from trade bodies that the scheme is not working because funding is still not getting through to small businesses.
Through the £1.3bn EFG scheme, the Government guarantees 75% of each loan granted. It is aimed at businesses with sales of up to £25m which are struggling to access finance because of banks being more stringent about their lending conditions.
Peter Ibbetson, chairman for small businesses at RBS, now almost 70% owned by the state, said that £63m had already being sanctioned or is in the pipeline despite the EFG scheme being in its infancy. He added that the bank is now approving about £2m a day of lending.
"It will take a while for confidence to return to the market. Many firms are still looking for overdrafts rather than loans, which shows they are nervous about investing," he said.
Ibbetson warned that smaller firms are being put under pressure because large customers are delaying payment and this is one reason for businesses to apply for a loan from the EFG scheme. While the cost of lending is decided on a case-by-case basis, businesses should expect to pay between 2% and 4% over the Bank of England base rate, according to Ibbetson.
Glasgow-based Axis Media, a direct marketing and distribution company, recently received a loan of £100,000 through the EFG scheme to expand its business, and said there should be more funding for small businesses.
Co-operative Bank, which last week opened a corporate banking centre in Edinburgh as part of its £18m expansion plans, has become the latest lender to sign up to the EFG scheme.
Keith Alderson, director of corporate banking at the Co-operative, said staff in all 20 of its corporate centres across the UK have been educated on how EFG works and it is now ready to start lending to businesses.
"It's extremely difficult for small and medium businesses at the moment as it's generally hard for them to access credit and raise finance," he said. "However, my sense is it's not as bad as a few months ago."
He said the Co-operative had benefited from the image it had of being "steady, predictable and even boring", as business and retail customers are now looking for safer havens.
