SNP's small firm loan fund is damned with faint praise

A CONTROVERSIAL £55 million fund intended to help small firms fight their way out of recession was finally launched by the Scottish Government yesterday, raising heckles over its lengthy delay.

The Scottish Loan Fund (SLF), part of the government's vaunted Scottish Investment Bank (SIB), opened for applications but questions were asked over why there has been a near two-year delay since the bank was first announced by First Minister Alex Salmond.

The fund will offer loans of between 250,000 and 5m to high growth firms, particularly those focused on exports. Businesses with up to 250 staff and an annual turnover above 1m will be eligible.

The government had hoped that the 55m of public money would be topped up by private sector funding but it yesterday admitted that talks to secure external investment were still "ongoing".

Jeremy Purvis, finance spokesman for the Scottish Liberal Democrats, said that with no private funding, the fund could have been established two years ago. "It would have been good at the height of the recession and could have made a substantial difference to struggling businesses, but as it is there have been considerable delays."

Purvis claimed many businesses had "given up waiting" for the bank to start lending.

Finance secretary John Swinney said: "The 55m fund will provide vital support for companies in two key areas - supporting our exporters and addressing the issues with access to finance that we know have held back companies with real potential for growth."

The Government has come in for criticism over the SIB since it was first announced by Salmond at the STUC conference in Perth in April 2009.

Critics of the policy have pointed out that the SLF is the only "new" part of the investment bank, with the remainder of its activities taken up by managing existing Scottish Enterprise funds.

Some business groups have also pointed out that the SLF will only help a small number of firms, and the type of lending will be relatively expensive.

Colin Borland, head of the Federation of Small Businesses in Scotland, said the fund was "welcome as far as it goes".

"For those companies that are able to apply for it its great news," he said. "However, we need to be careful that we don't fall into the trap of thinking that this is going to be a solution to the business finance problems we are seeing across Scotland."

The SLF will be managed on a commercial basis by independent fund manager Maven Capital Partners which is based in Glasgow with an office in Aberdeen as well as three bases south of the Border. Andrew Craig, partner at Maven, said it would now open an Edinburgh office and take on more staff.

He said the firm was only just becoming involved with the process of looking for private investors, but he hoped that private capital would be in place within weeks."We're planning to get them on board as quickly as we can so we can allocate loans accordingly," he said.

The size of the SLF includes a further 5m to the original 50m promised by the public sector thanks to a further 2m in European funding and a 3m commitment from Highlands & Islands Enterprise.

CBI Scotland director Iain McMillan said the fund was "a welcome addition to the range of lending options available for businesses in Scotland".