According to independent finance provider Syscap, the value of loans offered under the EFG scheme fell to £433 million in the 12 months to the end of June 2011, down from £742 million during the previous twelve month period.

Syscap points out that in the most recent quarter, between April and June 2011, just £93.1 million worth of loans were offered to small businesses under the EFG scheme, down from a peak of £254.9 in same quarter of 2009.

If that trend continues, the government is unlikely to reach the £600 million allocated for additional lending under the scheme between 1 April 2011 and 31 March 2012.

According to Syscap, excluding leasing, a key source of SME financing from the scheme, may be putting an artificial curb on demand for EFG loans. As a result, businesses may be postponing crucial capital investment.

Despite submissions from the finance industry, the Enterprise Finance Guarantee (EFG) scheme excludes the funding of businesses through lease financing. Leasing is a crucial source of funding for SMEs as it helps spread the cost of assets and maintain a healthy cash flow and is also tax deductable. Another form of asset finance, invoice financing, is allowed under the EFG.

Chief executive of Syscap Philip White says, ‘With economic performance in the last two quarters looking lacklustre and the on-going Eurozone crisis continuing to erode business confidence, an expansion of lending under the EFG scheme is urgently needed to help put the economy and job creation firmly back on the growth track.

‘But with the value of EFG loans offered during the first quarter of this financial year so low, it’s looking highly unlikely that the scheme will make much of an inroad into the £600 million that has been put aside for it.’

Related: EFG? ‘Don’t bother’