Brown: Boosting business

Ministers have pledged to cut back on the red tape damaging government assistance to smaller businesses.

The move came as the recommendations from Teresa Graham's review of the Small Firms Loan Guarantee (SFLG) were published by the Treasury and the Department of Trade and Industry.

The review makes a range of proposals including an expansion of the levels of funding available to individual small and medium sized enterprises (SMEs) and focusing the scheme on supporting high growth start-up and young firms by introducing an age limit on eligible firms.

It also calls for a radical reduction in the bureaucracy surrounding the scheme

This will be include moving away from the current case-by-case approach to what is described as a light touch, low bureaucracy "portfolio" approach, with the removal of the requirement for the DTI to check any loan application upfront.

Since the scheme's launch in 1981, over 88,000 loans have been guaranteed, worth approximately £3.5 billion in total.

And changes to the eligibility criteria made in April 2003 have led to an increase in the use of the scheme of over 50 per cent.

More than 6,000 loans have been guaranteed since April 2003 with a value in excess of £400 million, and the average loan size has now risen to around £69,000, the Treasury said.

"Though the debt market for SMEs has improved a great deal since the start of SFLG 23 years ago, I've found that some SMEs - particularly start up and young SMEs with growth ambitions - continue to find a lack of collateral a barrier to accessing debt finance," said Graham.

"That's why I am recommending that the SFLG continues to operate.

"However, SFLG is far from perfect.  Its objectives are not well understood; its availability is patchy; its administrative structure is showing its age; and costs to the taxpayer are rising fast.

"I believe small firms need SFLG, but they need an updated and modern intervention.

"My report sets out the recommendations that I believe will enable SFLG to become a modern intervention characterised by strategic and targeted usage, a high level of understanding about its performance, and which is monitored through light touch regulation and focused on the achievement of broad policy goals."

Vital funds

Welcoming the report chancellor Gordon Brown said: "Access to finance is a vital ingredient in the growth of any successful business.

"Our ambition as a government is to take action to ensure that talented entrepreneurs can get the finance they need to convert their ideas and creativity into thriving businesses."

And industry secretary Patricia Hewitt said she would now "determine how best to successfully implement the recommendations".

Further details will be announced at the time of the pre-Budget report in the autumn.