European loans to small firms
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IF YOU ARE a small company and want to expand, now is the time. The money is there to borrow if you want it; a new Department of Industry scheme just been announced. This follows the signing of what is termed an exchange risk agreement between the Industrial and Commercial Finance Corporation and the Department of Industry.
This agreement, the Department says, will enable loans from £15,000 to £250,000 to be made at attractive rates of interest to small and mediumsized firms throughout Britain. This loan facility marks the first time that European loans for smaller firms are available throughout Britain. It's all part of the "European Year of Small and Medium-sized Enterprises," would you believe?
Loans for smaller firms have, apparently, been available for some time from the European Investment Bank and the European Coal and Steel Community. But these loans were restricted to what are termed the assisted areas and coal and steel closure areas. The ICFC facility now extends these loans to smaller firms throughout Britain.
Announcing the development, John McGregor, Parliamentary Under Secretary of State for Industry said: "I believe that these loans will be attractive to small firms. Although the cost may vary from time to time depending on interest rate levels in Community and other countries, under the Scheme, funds will be lent at present by ICFC at 111/2 per cent all in. This includes a small charge for exchange risk cover.
"We believe this money will bring forward projects that would not otherwise have taken place because of this relative advantage in borrowing costs. The Government is playing an important role in two respects, first by providing the necessary exchange risk cover to protect the borrower against adverse exchange rate movements; without this cover the loans would simply not be attractive to the smaller firm.
"Second, as I am constantly saying, I am conscious that what the small firms need most in schemes of this sort is simplicity and speed of response; we have ensured that my Department's procedures for approving applications for exchange risk cover are simple and straightforward."
He continued: "ICFC is the first UK institution to take up an agreement for these European loans. The European Investment Bank is currently talking to both the National Westminster and Midland Banks about the possibilities of their entering into similar agreements. I hope that it will not be long before we have some additional announcements to make."
Speaking generally about policy in Europe towards smaller firms, Mr McGregor pointed out that the UK had gone a long way towards providing a climate which stimulates enterprise and risk taking.
It should, perhaps, be explained that this move reflects the fact that the European Commission has contracted loans under the New Community Instrument (NCI) for on-lending to small and medium-sized enterprises in the UK and other member states. In the UK these will be disbursed from the European Investment Bank through banks and financial institutions.
The ICFC agreement represents the first loan agreement with the European Commission and the European Investment Bank to take £10m under the NCI facility for onlending in the form of loans in the £15,000-£250,000 range. The loans will be for up to half the fixed asset costs of projects in manufacturing industry, mining and extraction, tourism and industry-related services outside the assisted areas. EIB loans for smaller firms are already available in the assisted areas.
It should also be noted that the new loans will only be available to independent companies employing less than 500 people and whose net fixed assets do not exceed about £45 million."That's small," I hear some people saying.
The Government is providing ICFC with exchange risk cover for the £10 million which means that the small businessman's repayment liability to ICFC will be fixed wholly in sterling.
For loans where the Government is providing exchange risk cover only, a streamlined appraisal precedure will apply which will give the applicant smaller firms the minimum of paperwork. A decision on an application for exchange risk cover for a loan can be provided within a few days.
The new loans do not apply to Northern Ireland which is already eligible for EIB loans.
Details of this new facility which ICFC is able to offer on behalf of the European Investment Bank are set out in a leaflet available from ICFC at 91 Waterloo Road, London SE11 8XP. This contains a list of ICFC offices throughout the country which can be contacted by companies interested in the facility.
Haulage operators may need such loans the way their costs are escalating again, especially as many See all the financial merits of running at 38 tonnes sliding away from them — fast.
There is little wonder that the Road Haulage Association reacted angrily to the Freight Transport Association's call to them to avoid rate increases.
This came at a time when hauliers were negotiating the latest drivers' wage increase applications and was followed up by the FTA suggesting a level of benefit from 38-tonner use with which the RHA did not agree.
The £470 rise in vehicle excise duty on four-axle 32.5-tonners and the tax of £2,940 on 38tonners (much more than most people anticipated) sent hauliers hauliers reeling and the imposition of a 3p a gallon rise in diesel duty was a body blow.
It is difficult in the face of these constant increases in costs for hauliers to do the work at the same price. Let's hope the FTA will recognise this and change its tune, bearing in mind that the steady erosion of margins helps no one in the end.
The 38-tonne issue cannot be divorced from the cost situation as a whole and it is becoming increasingly apparent that a higl. utilisation factor at full load (ie 38-tonnes gcw and not 34 tonnes) is the only certain way o making investment in 38tonners pay off. Norfolk Line announced an £8m investment programme for 38 tonne semitrailers intending to operate 300 and eventually 600, of its 1,200 semi-trailers at the new weights Note that this company has worked out its requirements on the basis of maximum utilisatioi and is only substituting 38tonners for 32.5 tonne outfits where operation at 38 tonnes shows to advantage — that is the vehicles will always run at 31 tonnes. That's the way to do it. by George Malcolm