The support on offer covers a wide range of finance applications. Currently, though, there are three main initiatives for SME lending – Regional Growth Fund (RGF), Funding for Lending Scheme (FLS) and Enterprise Finance Guarantee (EFG).
According to the government’s own feedback, the take-up so far has not been encouraging. Still, it seems that the RGF scheme has been the most successful – specifically in terms of the printing industry and the purchase and financing of new equipment.
While the EFG scheme seemed to be potentially one of the best support mechanisms available, the take-up I’ve seen to date has been very low. There may be several reasons for this, but I would suggest that the main reason is this: the criteria for qualifying for this cover is at best vague and open to the individual banks’ interpretation.
The government has issued no hard and fast rules about which SME businesses qualify – or how. Instead, the banks are trusted to underwrite and administer the scheme on behalf of the government.
EFG potentially offers the highest level of support for SME lending, but sadly most SMEs have failed to meet the underwriting criteria set by the lending banks.
As for the FLS, it’s early days, but cheaper SME funding (if that is the main benefit) will not help if the lending bodies are unable to underwrite or approve the credit transaction in the first place. A 1% reduction in interest rates charged is potentially 1% of nothing because it will not help the lenders underwrite the deals in question. Credit approval is by far the biggest challenge to those printers looking to buy and finance equipment. The only scheme so far to even come close to helping this is the RGF scheme.
Why? Because the RGF scheme can provide a grant of up to 20% of the capital costs of equipment. This grant is then taken as a finance deposit that significantly effects the credit approval process. Gone are the days of no or low deposit finance deals, but a 20% deposit is notable – especially when buying or financing equipment with a realistic resale value.
The RGF take-up has been patchy both regionally and from the lenders who have been allocated the funds. But that’s probably because the initial roll-out was vested in just two of our largest financial institutions: one who seemed to do very well and the other who did not.
The difference, it seems, stems from the lenders’ interpretation of the scheme parameters. This could be seen as restrictive or supportive, depending on your outlook.
What’s encouraging is that round three of the RGF funding boasts nine nationwide lenders, some of whom specialise in the provision of finance for printers. On that basis, I would guess round three of allocation will have a much higher take-up. That’s good news for kit sellers and for printers looking to invest.
