Government initiatives
It’s hard not to acknowledge Government efforts to stimulate bank lending and private investment. However, serious question marks remain in relation to the raft of initiatives now on the market.
If companies have the time to wade through the acronyms – EFG, CFE, ECF, RLTF, APS, WCS, AAP and SIF – they may find something suitable. The problem is, lenders and investors are also struggling to get to grips with it all and there remains a disconnect in their implementation, says Baker Tilly’s Rob Donaldson, who together with Octopus Investments’ Chris Allner selected the following four for consideration.
- The Working Capital Scheme (WCS) was created to increase lending via existing and new loans by promising to guarantee 50% of £20 billion short-term loans. Companies with a turnover of up to £500 million are eligible.
- While no longer available, the effect of the Asset Protection Scheme (APS), which insures against historic losses, looks to have stimulated lending from RBS and Lloyds TSB, thinks Donaldson.
- The Enterprise Finance Guarantee (EFG) scheme also has the potential to aid some of the lower mid-market companies, with loans of between £1,000 and £1 million guaranteed by the Government. The £1.3 billion scheme runs until March 2010.
- The £75 million Capital for Enterprise Fund (CFE) allows over-geared, but successful companies to sell debt for equity. Allner’s is one firm administering the funding, with a £2 million first round limit and a maximum of £3 million. “It should ease some of the pressure,” says Donaldson. “These are not magic solutions or bail-out funds though. They’re designed to make banks healthier.”
Related thinking
- The age of equity
With bank lending dramatically reduced, now may be the time to consider alternatives. The re-emergence of private equity could hold the key to mid-market companies' funding requirements.
- Rich pickings
In this battered economy, many companies are struggling simple to survive. But for stronger cash-rich businesses with vision, now is the time to start the search for potential acquisition targets.
- No time to panic
Companies faced with a lack of credit over the next 18 months need to keep their heads and find ways to survive.