AMONG the raft of measures recently announced by the Government to help small businesses survive the recession, the Enterprise Finance Guarantee scheme is proving one of the most controversial. Banks have been accused of snubbing applications from long-established and profitable firms, although other business owners say they have been successful. Business editor SAM THOMSON reports.

Every year, Sussex Enterprise, the county’s chamber of commerce, sends out its Voice In Business survey to gauge the opinions of its members on the direction of the local and national economy.

To no one’s surprise, this year has seen the biggest response ever. More than 700 questionnaires have been returned so far and the full results will be published later this year.

Looking at initial responses, the relationship between bankers and businesses is one of the biggest concerns among owners and managers across Sussex.

Many accuse the banks of hoarding cash to shore up their capital instead of loaning it out to struggling enterprises.

One anonymous Sussex businessman said: “Bring back capital punishment, especially for bankers.”

Other responses to Sussex Enterprise’s question: “What is the ONE action the Government should take to help businesses survive the recession?”

include: . “Demand that the banks take a more proactive position on lending and financial support.”

. “Instruct the banks which are now taxpayerowned to be more realistic in making loan decisions.

For example, in December we wanted a temporary increase in our overdraft from £15k to £20k to finance the stock of a new product we were launching in January. The bank refused and then undertook a review of our facility. We were not even using the overdraft at the time.”

. “Force lenders to be more flexible in their approach to all businesses. Make loans available for proper business requirements.”

One of the ways the Government has tried to address these concerns is through its Enterprise Finance Guarantee scheme (EFG), through which it promised to back £1.3 billion in loans and overdrafts with a 75% guarantee.

Not everyone is happy with the way the scheme has worked, with some business owners saying the banks are making unreasonable demands such as requiring personal property to be put up as security, despite the 75% Government guarantee.

Andy Barter, area policy manager for the Federation of Small Businesses (FSB) in the South East, asked members to report on their experiences trying to get funds through the EFG.

The underlying problem for businesses seems to be confusion among banks over who is eligible.

Mr Barter said: “In February, when the scheme first launched, the consensus was that when a business owner asked their bank manager they either did not know anything about the scheme or said that if the owner had an equity whatsoever then they would not qualify.

“Business owners were quite disconcerted by that. Since then, we have had some feedback from members who have been successful but the majority are still finding issues over equity a problem.

“Members need to keep on telling us whether the scheme is working or not so we can put pressure on the Government and banks to ensure it does help our members.”

Nick Broom owns two long-established Sussex companies, digital branding agency Preview and PVL, which specialises in vehicle-marking manufacture for agencies such as the police and fire service.

He has been banking with Natwest and applied for an overdraft under the EFG to fund growth plans at PVL.

Mr Broom said: “I had no borrowings on either company apart from a small bit of finance that bought some new equipment.

“I just wanted a small overdraft of £20,000 to £30,000, which is less than 5% of our turnover.

After a lot of discussion, Natwest said I could get it but only if I offered a personal guarantee.”

Even though he is willing to put his own money on the line, Mr Broom feels insulted by the way he has been treated.

He said: “There is no trust any more at all. I have worked hard for years building my companies so I think I can demonstrate a good commitment to the business.

“At the end of the day, I probably will put up my own money in but I don’t see why I should. I’m also paying 6% interest even though the bank is not taking on any risk.”

Mr Broom believes many small business owners will be unable to provide a similar personal guarantee and will be forced into bankruptcy.

Away from these gloomy predictions, some business bosses are strong advocates of the EFG and similar Government-backed loan schemes.

Keith Pordum, the managing director of Crawley- based hot food vending machine company Bon Appetit, has a history of successful business loan applications.

He admits that, as an ex-bank manager himself, he has an advantage in putting forward applications he knows will be looked upon favourably.

In the past, Mr Pordum has been successful three times under the EFG’s predecessor, the Small Firm Plan Guarantee, securing up to £100,000 each time.

He is currently applying under the EFG and is confident his proposal will not be rejected.

Mr Pordum said: “Key to the whole thing is talking to the right bank manager. I had 16 years in banking so I’m seen as knowledgeable and trustworthy.

I am also looking money for the right reasons. I want to expand rather than refinance.”

Business must accept that bank managers are themselves struggling with the EFG, according to Mr Podrum, and they should not baulk at demands for personal guarantees.

He said: “Bank managers have got a lot of work to do under this scheme and more because they also have to deal with the Government, with little return. By definition it is higher risk because people apply when they have not been able to get a commercial loan.

“If a business owner is not prepared to give a personal guarantee then he has no faith in his business and is in the wrong area.”

Not everyone has had to put their own savings on the line to secure money through the EFG scheme.

Caron Howe, the founder of Chichester-based More Foods, was one of the first companies in the country to successfully apply.

She was able to get a loan of £245,000 from Lloyds to fund a move into larger premises.

Although a personal guarantee was not needed, she has put a debenture on the business.

Ms Howe said: “It was relatively simple because I have always had a good working relationship with my bank. I have been dealing with them for the past four years.

“My business manager called his boss and they both came down to the bakery to have a tour. They could both see why they needed the money so they were on board straight away.”

More Food started as a sandwich bar before Ms Howe’s bakery skills led to her branching out into a new business venture.

Her customers have included such prestigious names as the Wimbledon tennis championships and she also supplies to the Budgens chain of supermarkets.

The loan will allow the company to move into premises double the size of its existing 8,000sqft bakery.

Currently 40 people work at More Food and it is hoped that this number will also double by next year.

Ms Howe offered the following advice for anyone applying under the EFG: “Businesses must have a very clear and comprehensive business plan.

“Don’t be afraid to ask your banks for advice and be honest with them.”

Another business which has managed to get its hands on money is Hove-based Spectrum, a leading photographic and finishing centre.

The company, which has built up an impressive customer base including Reuters, Nikon and Universal Music, received £30,000 under the EFG through their bank, RBS.

The loan will be used to develop a new website.

Managing director Steve White said: “I am grateful to RBS for the ongoing support it has provided to our business.

“We are a passionate company that strives to succeed and I am extremely proud of our new online facilities.

“They enable customers to directly send their work to our cutting edge printing services available 24 hours a day, seven days a week.

“This new area of business has already proven popular and compliments our existing services.”