The UK Government’s start-up loans scheme has been extended only three months after its launch but questions have been raised about how successfully it is being run.
The idea behind the original scheme was to combat high youth unemployment by offering young people, between the ages of 16 and 24, low cost loans to start a business. When they were launched it was said that a typical loan would be £2,500 but the amount can vary. The hope is that they will be able to use their £2,500 to create a viable small business. In addition to receiving some cash young people would also be given help and advice from business mentors. Both the money and the advice on offer originates with the government but then passes through a series of private businesses and organisations before reaching the young people who have applied for the loan.
The newly extended start-up loans scheme will work on the same principles but anyone up to and including the age of 30 will now be eligible. To cater for this the total funding pot for the loans has increased from £82 million to £100 million over the next three years.
The main criticism of the scheme has come from the way it has been launched and run. Critics including the Shadow Business Secretary Chuka Umuuna have pointed out that the scheme has been slow to start and has not distributed much in the way of funding. The Start-up loans scheme was originally announced back in May 2012 but the scheme did not actually start giving out money until mid September. Between the first announcement in May and the end of December 2012 the scheme had attracted around 3000 enquiries. This has resulted in 460 loans being made. The government’s target is for the scheme to create about 45,000 companies in the next three years. The Start-up Loans Company have acknowledged that it has taken them some time to get started as they tried to put partnerships in place, however they are promising 100 loans per month in 2013.
Rather than distributing the Stat-up Loans centrally delivery is being left to a series of regional partners who are being administered by the Start-up Loans Company. As part of their announcement today the government have launched some broad figures on the regions where the funding has gone. Using the government’s figures on the regional distribution of businesses it would seem as though the start-up loans distributed so far have been heavily slanted towards London and the South East. The East of England in particular seems to have received a low proportion of loans considering the number of businesses active there.
However it is early days yet and most of this variation can probably be explained by the different regional partners getting used to the system. It will be interesting to watch how quickly the loans are given out and where they go in 2013.