Mixed messages and poor marketing are confusing small businesses about the role of the Enterprise Finance Guarantee('EFG') Scheme - which replaced the Small Firm's Loan Guarantee Scheme, according to a Birmingham accountant. And despite the scheme being responsible for lending of more than £850m, it is still " a drop in the ocean", according to Henry Briggs, senior partner of the Birmingham office of Haines Watts.

"Last November, the government announced that the guarantee would be extended, committing a further £200m to the EFG facility over four years. But at the same time, it cut the guarantee it provides to the high street banks which mean that bank exposure to potential liabilities under the scheme would impact negatively on the ability of smaller banks to use it," said Mr Briggs.

"Despite the scheme being available nationally, each participating bank has different rules and that, coupled with recent and seemingly conflicting announcements by government, is serving only to confuse businesses," he said.

Some 40 lenders, including the main high street banks, offer loans through the EFG Scheme but, said Mr Briggs, many businesses were loath to apply to banks for loans in the first place - partly because of conflicting stories about finance availability and the need for security.

"It is not helped by banks having their own rules regarding the scheme. The government provides a guarantee for 75% of the value of the loan but many banks are then requiring the company directors to provide a personal guarantee for the remaining 25%  - whilst others ask for a personal guarantee for 100% of the loan, despite it being underwritten by government."

Figures from the Department for Business, Innovation and Skills show that in the months from January 2009 to March 2010 some 8346 loans were made under the scheme, to a value of £850.7m. Figures for 2010-2011 are not yet available, but Mr Briggs believes they will be at a similar level.

"Putting that into context, there were an estimated 4.8 million  private sector enterprises in the UK at the start of 2009, an increase of 51,000 since the start of 2008. These enterprises employed an estimated 22.8 million people, and had an estimated combined annual turnover of £3,200 billion. The support available through the EFG is a drop in the ocean when compared with the potential need.

"At the same time, we are told that additional funds have been committed by government but it is clear that those funds are not getting through without the use of personal guarantees. How is business supposed to expand and deliver when the rules are confusing and the availability of the loan depends on which bank you are with?"

Mr Briggs is calling on the government for greater transparency and a level playing field so that businesses can assess which lender is best for them, according to their circumstance. 

"Businesses need to know where they stand. There are further changes coming to the scheme in April 2011 as the Government is working with the banks on a commercial scheme based on the EFG for businesses seeking working capital for exports. Whilst this is much needed and in line with their stated strategy for growth, it still leaves uncertainties for businesses about how and where they might access funds under the scheme," said Mr Briggs.

Haines Watts acts for more owner managed businesses in the UK than any other accountancy practice and has 50 offices nationwide.

For more information on Haines Watts, please visit their website here: www.hwca.com