Social enterprise financiers will be eligible for government guarantees on loans worth up to £20m, it was announced this week.
Business secretary Lord Mandelson told guests at a social enterprise summit that the government would guarantee loans from accredited lenders to Community Development Finance Institutions (CDFIs) totalling £20m, in an extension of its Enterprise Finance Guarantee (EFG) scheme.
CDFIs provide finance to social enterprises, individuals and businesses in disadvantaged areas which often struggle to access mainstream bank loans “due to the higher risk associated with supporting the groups and communities to which they lend”, the government said.
“In the current economic climate, [CDFIs] are an increasingly important source of finance and investment for small businesses and social enterprises that have been unable to access finance from banks,” said Mandelson.
The EFG was launched last year with the aim of enabling an additional £1.3bn of capital to be lent to small businesses struggling to access finance following the credit crunch. Under the EFG, the government guarantees 75% of loans to viable beneficiaries.
Loans worth £186m have now been awarded to 2,059 firms through the EFG, while more than £344m of eligible applications have either been granted, processed or assessed, the government said.
Earlier this week, the government also launched a year-long Access to Investment programme, in conjunction with the National Endowment for Science, Technology and the Arts (NESTA) to help social enterprises source and access EFG and other forms of funding.
According to research, social enterprises often struggle to access growth finance, which is partly down to a lack of appropriate financial advice.
© Crimson Business Ltd. 2009