Local businesses could face greater difficulty securing growth funding, after the Scottish Government confirmed it will not recapitalise the East Ayrshire-based Business Loans Scotland (BLS) fund, which has now entered its wind-down phase.
The update, which will be presented to East Ayrshire Council's cabinet, stated that the decision effectively ends one of the few local authority-led loan schemes available to small and medium-sized enterprises (SMEs) across Scotland.
The report warned that while existing loans will continue to be managed until March 2029, no new lending will take place, potentially creating a significant funding gap for local firms unable to access commercial finance.
BLS, a consortium of Scotland's 32 councils, was launched in 2018 as part of the Scottish Growth Scheme, offering loans of £25,000 to £250,000 to SMEs which couldn't secure backing from banks.
The national fund was based at the Ingram Enterprise Centre in Kilmarnock, and supported 166 businesses nationwide with £16.2m in loans, helping to create 658 jobs and generating more than £300m in additional sales across Scotland.
However, the Scottish Government revealed last year that the fund would be wound down.
Last August, Public Finance Minister Tom Arthur told MSPs: "At present there is no available budget to recapitalise Business Loans Scotland and UMi Debt Finance Scotland.
"The Scottish Government continues to face a deeply challenging fiscal context, including a significant reduction in our Financial Transactions budget, which funded previous loan schemes under the Scottish Growth Scheme."
Councillors will hear that the Scottish Government's financial pressures and a reduction in its financial transactions budget had forced the move to a "realisation phase," in which existing loans will simply be repaid and managed out.
Five BLS staff members were made redundant during the summer, with two part-time roles retained to oversee repayments through to 2029.
East Ayrshire Council will now draw down its £912,000 residual balance from the fund - ringfenced from previous European Regional Development Fund contributions - to support other economic development projects and business support activity locally.
"This marks the end of a successful period of local authority-led financial intervention," the report concluded. "The withdrawal of BLS reduces the finance options available to local SMEs, especially those unable to access commercial lending."
While institutions such as the British Business Bank and Scottish National Investment Bank continue to operate, council officers say the trusted local model offered by BLS will be difficult to replace in the short term.
The council will now work with regional partners to explore new finance mechanisms aligned with its Community Wealth Building strategy, ensuring that locally owned firms can continue to access growth support.
Cabinet will consider the report on 22 October.
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