Vince Cable wants private sector help with SME schemes

It is understood that Vince Cable, the Business Secretary, is keen to replicate the approach used on the Start-Up Loans programme, which provides 18-to 30-year-olds who want to start a business with low-cost loans and advice.

The £112m initiative is managed by an independent company led by former Dragons’ Den star James Caan.

Mr Cable is thought to have been impressed with the speed at which the scheme has got off the ground, with around 4,000 budding entrepreneurs having received about £20m in start-up funds since it was launched by David Cameron , the Prime Minister, last year.

The Start-Up Loans Company oversees a network of delivery partners around England for the publicly funded loans on a not-for-profit basis. The Business Secretary is keen to employ a similar strategy to new and existing government schemes for small businesses, which could see independent bodies run by private sector partners manage their implementation, promotion and administration.

A possible candidate is the Enterprise Finance Guarantee, a flagship lending programme designed to help small businesses that have viable business proposals but no security to offer against a loan. The scheme sees the Government act as guarantor on 75pc of individual bank loans of between £1,000 and £1m.

The EFG has been in almost continual decline since it was launched in 2009, The Business Department is frustrated that numerous government attempts to revive it have failed, despite independent research which found that the EFG is effective in helping companies that would otherwise have struggled to secure loans from banks.

Lending through the EFG collapsed to just £66.3m in the first three months of this year, down 67pc from its peak in the third quarter of 2009. However, the Government has no plans to wind the scheme down, although Mr Cable is understood to be concerned that banks are failing to tell their customers about it.

Bobby Lane, a partner at accountancy firm Shelley Stock Hutter, said an independent body could help revive the EFG, which he said remains a “good scheme” with untapped potential.

“We’ve had clients who have been very successful with it, and start-ups that wouldn’t have got off the ground without it. On one side a problem is that banks do remain nervous and don’t like start-ups, but the other side is education. I don’t think banks at junior [relationship manager] level understand the EFG. They don’t have the experience of when it’s appropriate. And on the customer side there’s a need to understand the EFG is not the Government giving you money.

“An independent body with a separate role to push it could solve the problem.”