“Affordable” loans of around £2,500 and business training will be offered to young people aged between 18 and 24 who have a “viable” business plan, the prime minister will announce on Monday.
However, the launch of the ‘StartUp Loans’ scheme has been overshadowed by criticism from senior business figures over the Government’s “lack of action” to stimulate growth.
Sir Richard Branson, who originally mooted the enterprise loans initiative and backed the Conservatives in the run-up to the 2010 general election, demanded “action to match [the] rhetoric” from the Coalition, particularly on politicians’ failure to boost bank lending to small and medium-sized companies.
Figures released last week showed that the UK economy shrank by 0.3pc in the first three months of 2012, plunging the country into a deeper double-dip recession, while the Bank of England’s network of regional agents warned that many small companies are still reporting that they are “unable to obtain credit at any cost and [are] seeing overdrafts withdrawn”.
Business secretary Vince Cable yesterday moved to defend both his and the Coalition’s efforts to help small companies.He said that red tape has been cut and quangos abolished, and he pointed to his role in securing General Motors’ £125m investment in its Vauxhall plant at Ellesmere Port.
Mr Cable said the StartUp Loans programme, which will lend up to £82.5m to young people over the next three years, signals a “conscious cultural change” away from Labour’s commitment to ensuring half of all school leavers go to university.
The loans will be administered by private sector companies and charities such as the Prince’s Trust that already work with young people.
Former Dragons’ Den star James Caan has been appointed chairman of the a fund management company that will run the initiative.
“I’m hoping it will fund 75,000 new businesses. If one in three of those hire at least one person, that could be 100,000 people helped out of unemployment,” he told Your Business.
Mr Caan said he wants to appoint at least 12 partner organisations to distribute the money. He has asked technology investor Julie Meyer to find private sector organisations to ‘match fund’ the loans in an effort to expand the scheme.
The prime minister’s enterprise adviser, Lord Young of Graffham, developed the initiative. He published a report today which said Britain would have 900,000 more businesses if it had the same rate of entrepreneurship as the US.
Despite the Government’s adoption of his idea, Sir Richard told The Observer: “We need to get behind the small and medium-sized businesses that are the engines of any healthy economy. They need investment and finance, and that comes from the big banks. The politicians talk of encouraging lending; we need action to match that rhetoric.”
He said business rates should be reduced and called for a national insurance holiday on hiring people in a company’s first two years.
The loans will be charged at RPI (currently 3.5pc) plus APR of 3pc.
Mr Cameron said: “I want this to be the year where people can think yes, I can do it, that we can get as many viable businesses as possible off the ground, that people can have a go, and that we see a whole new wave of entrepreneurs who start small but think big.
“StartUp loans are a fantastic opportunity for young people, not only to get the financial support they need, but also to give them the confidence to believe they can do it, that they can turn that spark of an idea into the next global brand."