Coleridge’s Ancient Mariner was a grumpy old man who detained wedding guests with tales of woe, ensuring they did not get any cake. I am conscious of that precedent in recounting the horrors suffered by some entrepreneurs who accepted bank loans backed by government guarantees. For a party is in full swing. Banks are disbursing £1.3bn to small companies through a recession-busting lending scheme. But before diving in, credit-hungry entrepreneurs should ponder the pitfalls. I promise not to mention crossbows or sea snakes.
The Enterprise Finance Guarantee launched in January is based squarely on a more modest predecessor, the snappily-titled Small Firms Loan Guarantee. This has doled out more than £4bn over three decades. Its mission was the same as the EFG’s – to support promising small businesses with weak collateral. Banks lent companies up to £250,000, with the state guaranteeing 75 per cent of the sum.

COLUMNISTS 

