Alex Salmond's £40m export fund fails to excite small business

A group of banks, including Royal Bank of Scotland, Lloyds Banking Group, Clydesdale Bank and Santander, have agreed to support the Holyrood government's flagship Scottish Loan Fund, part of the long-awaited launch of the Scottish Investment Bank (SIB) that will operate it.

The fund will offer debt finance of between 250,000 and 5m to high-growth SMEs, particularly exporters.

Unveiling his partnership with the banks, Alex Salmond said the apparent bias against exporters applying for loans, overdrafts and credit cards was "very disturbing".

The private sector injection into the SLF brings funds available to 94m, with the public sector having already committed 55m.

Salmond said the government was confident of securing an additional 50m of private-sector investment for the bank further down the line.

But small businesses yesterday warned that the new loan fund would not be a "panacea" to the sector's funding woes and drew support from a survey, also published yesterday, which painted a worrying picture of small business lending north of the Border.

Critics of the SIB, which has taken almost two years to materialise, pointed out that the fund will only be open to a limited number of high-growth companies. It will also only provide a specialist type of debt funding, known as mezzanine, and sceptics say it will do little to help the average SME, which is still struggling to get a fairly-priced loan or overdraft.

The government said Maven Capital Partners, which is managing the fund on behalf of the SIB, has already received 62 notes of interest, but Andrew Craig of Maven admitted that only between 50 and 100 firms are likely to receive finance. "Obviously we have ambitions to increase that," Craig added.

Colin Borland, head of the Federation of Small Businesses in Scotland, said: "The SLF is good news for those businesses who meet the criteria. But it should be borne in mind that it's a specific product for a specific group of companies.

"It won't answer the general finance problems which - as the Access to Finance report shows - are still facing far too many of the small businesses which are the backbone of our economy."

The SIB, which also houses several existing Scottish Enterprise funds, has been dogged by criticism, particularly from the Scottish Liberal Democrats, over the near two-year delay between its announcement and establishment.

The initiative was originally intended to help small firms climb their way out of recession and into recovery.But Salmond yesterday insisted: "If you do things like this, they have to be done properly."

Commenting on the access to finance survey, Graham Galloway, managing director of RBS's commercial banking operation in Scotland, said demand among SMEs was still low as many firms are preferring to pay off their loans rather than taking on extra debt.

""We have (lending] facilities that have been approved for customers but have not been drawn down," Galloway said, insisting that RBS was well on its way to meeting this year's targets for SME lending.

According to the Scottish Government's survey, 43 per cent of SMEs polled sought finance last year, down from 53 per cent in 2009.