The value of bank loans being offered to small and medium-sized businesses via the government’s flagship small business lending scheme has fallen to a record low, says Funding Options.

The online business finance marketplace found that loans offered to small businesses via the Enterprise Finance Guarantee (EFG) scheme totalled just £55.6m in Q4 2018, a fall of 2.2% on the same period in 2017, and down 78% from its peak of £254.9m in Q2 2009.

The Enterprise Finance Guarantee scheme was launched in 2009 to help small and medium-sized businesses access bank lending following the credit crunch. The scheme provides loans to businesses that don’t have enough security to meet traditional lenders’ normal requirements. The government provides a guarantee worth 75% of the loan to lenders to underwrite their risk.

Conrad Ford, CEO of Funding Options, said: “The EFG was a successful concept when it was launched but it is now having less and less of an impact.

“The EFG was a saviour of many small businesses during the last credit crunch. Brexit represents a fantastic opportunity for this great scheme to come into its own once again and ensure that shortfalls in cash flows and gaps in lending can be covered up.”

Many small businesses may need extra funding to deal with the Brexit-related volatility in orders and payments from customers. Some businesses’ clients are holding off on making non-essential purchases to preserve cash and that is having a knock-on effect amongst their suppliers.

Funding Options says that more needs to be done to help ensure businesses who want to take out extra finance to cover any Brexit-related cashflow disruption are able to do so. Small businesses should be made more aware of schemes such as the EFG, as well as other alternative finance options that are available.

Ford said: “Brexit may go off without a hitch but if not, it would be sensible to line up emergency funding for small businesses.

“It would be great to see more small businesses aware of the benefits of EFG funding can bring.”

A lack of funding to help cover cashflow issues is one of the factors contributing to the increasing number of businesses entering insolvency. In 2018 17,439 businesses became insolvent, a five-year high.