Start-up Loans

Lord Bilimoria Excerpts

Wednesday 20th November 2013 Lords Chamber

[Lord Popat]

The noble Lord makes a very important point. When I ran an SME I had easy access to my branch manager. To borrow money was not that difficult and the turnaround of applications was very quick. I agree with the noble Lord that we need to focus at regional as well as at local level. What is now happening is that a large number of clearing banks have a central office which does underwriting through computers. I am sure that servicing the customer at a local level will become more important. The good news is that we have brought competition into the banking world. Aldermore, Metro Bank and Cambridge & Counties all have branch managers, so a large number of SMEs can deal directly with the branch manager rather than having an application going to the central level. With the demand for money and banks hungry to lend more, I am sure that, given time, banks will surely set up a branch manager network. That was a successful model in the 1970s and 1980s.

[Lord Bilimoria (CB)]

My Lords, I congratulate the Government on the start-up loans scheme. It is an excellent initiative and I am delighted that the Minister, a fellow entrepreneur himself, is answering these questions from personal knowledge. I started a business from scratch. I know how difficult it was to raise those first few thousand pounds. To get my first overdraft of £7,500 was amazing. I see that the sums involve an average of £6,000. The average start-up loan is up to £25,000. I hope that the Government will increase that figure because the bigger it is, the better the start-up. I notice that the Prince’s Trust is one of the delivery partners. Can the Minister confirm what the effect of this scheme has been on the Prince’s Trust, which has done excellent work in this area over the years? Is it actually giving out more money as a result of start-up funds in the scheme or less? Secondly, what are the Government doing to help the people who get these loans go on to get the further funding that they need? This is only the start. The Government’s small firms loan guarantee scheme is excellent. How many of these start-up loan recipients have gone on to government-guaranteed schemes, which are absolutely essential? Finally, are the Government encouraging this group of entrepreneurs to network in the future, creating environments and events that these people can attend so that they become a community and the Government can identify the high-growth companies which will be creating the jobs that will power this economy ahead?

[Lord Popat]

My Lords, we will remove the age limit. The limit on lending is £25,000 for a period of five years, at a 6% interest rate. We will look at this over a period of time once we have looked at the success of the scheme. The scheme is proving to be successful. There are a few examples, which I have in my folder here, of people who have traded very successfully, done well and gone to the clearing banks to borrow more money to make sure that their businesses grow. The people who participate in the Prince’s Trust are actively encouraged and are quite often mentored free of charge to help them set up their own businesses.