Government finance package for small businesses

14 January 2009

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The Government has launched a package of support to address the cash flow, credit and capital needs of small and medium-sized businesses in the UK. Here, we tell you what the package offers and how you can access the help available.

The package builds on announcements made in the Pre-Budget Report (PBR) in November last year and includes the following:

Enterprise Finance Guarantee: £1bn of guarantees to support £1.3bn of lending to smaller businesses.
Working Capital Scheme: Up to £10bn of guarantees to support £20bn of working capital.
Capital for Enterprise Fund: £75m capital fund (£50m from the Government and £25m from banks) to invest in businesses that need equity or quasi-equity.

Enterprise Finance Guarantee

This 75% guarantee for loans will support bank lending, of 3 months to 10 year maturity, to businesses with a turnover of up to £25m that are currently not easily able to access the finance they need. This will enable them to secure loans of between £1,000 and £1m through the Government's Guarantee, available up to 31 March 2010.

The Guarantee is available through the following high street banks from 14 January 2009: Barclays, Clydesdale/Yorkshire Bank, HBOS, HSBC, Lloyds TSB, Northern Bank and RBS/NatWest.

Click here to find out more about the EFG scheme.

Working Capital Scheme

This scheme is not available to individual businesses, but is designed to allow banks to lend to the level that government has requested and that businesses need.

The Government will make available to banks guarantees of up to £10bn for up to 50% of the working capital on a £20bn portfolio of loans. The banks have made a commitment to deploy this capital to ensure that existing lending is available at arrangement renewal dates, and to facilitate increased lending for short-term cash-flow purposes. This scheme should benefit businesses with a turnover of less than £500m.

This scheme should, in theory, ensure that banks do not reduce or withdraw renewal options for viable lending. It should also provide new capacity for banks to lend to UK businesses, which are currently suffering because of the withdrawal of certain lenders from the market.

Capital for Enterprise Fund

Further to the £50m debt for equity fund announced in the PBR, the Government has announced that this Capital for Enterprise Fund will provide £75m of equity, made up of £50m of Government funds and an additional £25m from Barclays, HSBC, Lloyds TSB and RBS.

The purpose of the Fund is to provide equity and quasi-equity of £250,000 to £2m for companies under the EU SME definition – that is, with turnovers of up to €50 million – which have viable business models and growth potential, and are in need of long-term capital.

To register interest for the Capital for Enterprise Fund, call 0845 459 9780.

Time to Pay

We also wish to remind you that businesses experiencing cash-flow difficulties can get help from the HM Revenue & Customs (HMRC) Business Support Service, as as announced in the PBR in November 2008. Businesses worried about being able to meet tax, National Insurance, VAT or other payments owed or coming due to HMRC can call the Business Payment Support Line, seven days a week, on 0845 302 1435. For more information read our article on Time to Pay.

For more information, visit the Business Link website and use its interactive tool to see what help is available to you.

If you are a member of the FPB and have any questions on how to go about accessing financial help, call our member helpline 0845 130 1722.

Banks' Statement of Principles

A newly-revised Statement of Principles setting out how banks will support small business customers in the economic downturn has been published by the British Bankers' Association. Click here to download a copy. Banks will send copies to all new and existing business customers soon and copies will also be available at bank branches.

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