Ending Of Discount Deal Results In Higher Interest Charges For Government-backed Loans

Jan. 7, 2010 - PRLog -- London (Shakespeare Finance) : Golden days seems to be over for small business ventures in UK as the current decision to raise the interest charges is set to hit them hard. Not less than 6,000 companies face the severe economic jolt in the wake of current higher interest charges.

From January 1, the 11 month discount deal with the EC is getting over that will result in raising the interest rates at least by a third.

As per the revised EFG scheme (Enterprise Finance Guarantee Scheme) the premium charged is set to rise by a third to 2pc in the wake of expiry of the discount deal in agreement with the European Commission. It constitutes the expiry of the EC state aid rules, that aims to bring down the discount considerably.

Certainly it is going to hit hard the small business ventures across UK and not less than 5,800 entities would be affected by the current decision. There are more than 3,000 other loans that are directly going to be affected by the current measure.

The news has been rolled out by the Daily Telegraph that has also stated that banks have amassed almost £6m in fees as they charged small businesses with the inflated rates. The scheme stood at £1.3bn in total.

As per the recent official research, the companies that opted for the loan had to pay 1.8pc of the loan in 'administration fees' ending up paying 6.75pc interest rate.

As the news rolled out, there has been much hue and cry especially among the small business groups that are compelling the concerned agencies to carry out a thorough investigation in the matter.

Stephen Alambritis from the Federation of Small Businesses said: “This scheme should be the cheapest in town. The Government should look at these charges and bring them in line with the charges imposed by the partially state-owned banks.”

It is certain that the current rates would certainly result in increasing the cost of the loans. As the Government's premium increases,it is likely to result in higher loan charges.

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