Young people with ideas for new businesses will be offered loans under a pilot scheme announced yesterday.
The Department for Business said that £10 million would be available for the one-year trial, which is expected to report before next year’s Budget. The scheme will be similar to student loans and offer up to £10,000 to people between 18 and 24 with viable plans.
A spokesman said, however, that loans would typically be about £3,000. “Before young people are able to access the loan, the programme will provide them with the support of a mentor to help them develop a business plan and build any skills that they need,” he said. Private and third-sector organisations are being sought to run the programme.
Zoe Jackson, 22, was one of three “Virgin Media pioneers” who visited David Cameron and Vince Cable — with Sir Richard Branson — last year to lobby for enterprise loans. Ms Jackson who set up a performing arts company, Living the Dream, said that she would have spent the money on marketing, including business cards and building a company website.
The Budget — which included a formal announcement of the National Loan Guarantee Scheme that enables banks to cut interest rates on small business loans — was broadly welcomed by industry groups, including the Institute of Directors and Federation of Small Businesses.
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But many thought that the Chancellor had not done enough to encourage investment from sources other than banks. Mark Hanington and Adrian Clark, of the start-up venture capital company, Find Invest Grow, said: “It is not just a question of shaving 1 per cent off the business rate on a loan, but about persuading smart investors to invest in new businesses.”
Simon Deane-Johns, a lawyer specialising in alternative finance with Keystone Law, says that the £20 billion for the National Loan Guarantee Scheme would be better channelled through non-banking routes.
The Chancellor promised only £1.2 billion via the Business Finance Partnership for non-bank lending. Mr Deane-Johns, a co-founder of the online lender Zopa, said that he would have liked regulatory changes in favour of alternative finance, tax breaks for investors and the expansion of the individual savings accounts programme to include accounts which invest in start-ups.
Other Budget incentives for entrepreneurs and small businesses included: raising the government guarantee for lenders from 13 per cent to 20 per cent; raising the limit for employee share options from £120,000 to £250,000 and enabling academics employed by start-ups to take part in the scheme; the extension of Export Finance for small businesses; and simplification of tax procedures for companies turning over less than £77,000. But the big disappointment was that fuel duty was not cut.