EIB Loans For Small Businesses…

Alistair Darling proudly announced last week that £4bn has been earmarked for lending by the European Investment Bank to the UK’s small and medium sized business sectors over the next four years as part of a European initiative to support SME’s through the current credit crunch.

His performance reminded me of the old yarn about a company chairman who stood up at the annual general meeting and announced: “Last year I had to report that the company was standing on the edge of a precipice. This year I am delighted to announce that we have taken one giant step forward…………”

Still, I suppose we should be grateful for anything coming our way at the moment. So what do we know about the EIB loans for small businesses?

Q: Will my business be eligible?

A: Any independent businesses with less than 250 employees and more than 75% of their own equity will be eligible for EIB loans.

Q: What can I use these funds for?

A: The funds can be used for any type of expenditure or investment that can be proved to be neccessary for a small business to grow. This breaks down into 3 sections:

- investment for tangible assets, namely plant or property

- intangible expenditure such as the filing of patents, transfer of business ownership etc

- additional working capital

Q: Will there be any exclusions?

A: Yes. Typically sectors involved in destroying life, ie arms, animal testing, tobacco, gambling (?), or – ironically – promoting life ie human clone testing etc

Q: What’s the minimum and maximum avaialbe for each loan?

A:  – minimum is, er, for very small projects (ie unspecified)

- maximum is for investments up to EUR 25m, with the EIB chipping in up to EUR 12.5m.

Q: What term will I be able to borrow over?

A: Between 2 to 12 years

Q: Who do I contact to get going?

A: The UKs leading commercial banks will administer the scheme on behalf of the EIB.  Contact your bank for more details.

Q: When does it start?

A: Now.

So far so good. However, there is a problem. The participating banks are actually under no obligation to apply for funds from the EIB at all. Worse still, of the six named banks only Barclays so far have made any committment play the game.  A bit of a rum deal if you ask me considering we – the great British taxpayer – now own most of them. And then there’s the question of who takes the risk, bank or EIB….

So, a glimmer of hope for small businesses but clearly the government need to apply more pressure to the named banks to ensure that they remember to particpate and filter the EIB loans down to cash hungry small businesses.

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