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Government extends start-up loans scheme

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3rd Jan 2013
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The government has extended its start-up loans scheme to those aged up to 30 with an additional £30m to the funding pot.

The scheme offers entrepreneurs loans of around £2,500 to help them start businesses and had originally been aimed at 18 to 24-year-olds.

The increase takes the total funding available to £112m over the next three years and is expected to help boost the scheme, which has so far got off to a slow start.

The initiative was announced at the end of May but has since only lent out £1.5m to 460 companies. More than 3,000 entrepreneurs have applied for the loans so far, however if the target is to be met then almost 45,000 will need to take out the loans.

The Start-up Loans Company behind the scheme, which is chaired by BBC Dragon James Caan, said the slow start was due to the time taken to set up local partnerships, but that the pace had picked up in December.

Labour shadow business secretary Chuka Umunna criticised the “disappointing figures” and the way the scheme was being delivered.

“With our economy flat-lining it's essential that initiatives like the Start-up Loans scheme are delivered effectively if they are to provide real opportunities for our young entrepreneurs,” he said.

As picked up by our sister publication BusinessZone.co.uk, commentators have said that the expansion of the scheme and the fact that only £1.5m has been lent so far suggests that it isn't working.

The Start-Up Loans Company responded to this: “We have been working carefully to ensure that we have the right systems in place to distribute the loans evenly across England. We are not rushing things through and are looking at each business very carefully. We don't want companies to go under; this is people's lives. The scheme is on track to meet its targets.

“When we have been travelling the country with the programme, it has become apparent that older entrepreneurs have very similar challenges to 16-24 year olds when it comes to mentoring and access to finance. Our programme is ideally suited to help the older age group,” it said.

The scheme was created by government enterprise adviser Lord Young and forms part of the government's attempts to reduce youth unemployment.

Prime Minister David Cameron commented on the expansion of the scheme: “It is by backing our entrepreneurs and championing small business that we can drive forward and grow the economy, and equip this country for the highly competitive era we are in.”

The loans must be repaid within five years, and interest will be charged at the level of inflation measured by the RPI, plus 3%.

Successful applicants are also given access to a mentor and free products and services from sponsors and partners.

Visit BusinessZone.co.uk for more small business reaction.

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