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Enterprise Finance Guarantee extended
6 October 2009
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From 1 October 2009, the Government's Enterprise Finance Guarantee (EFG) scheme has been extended to include ‘top-up' guarantees on invoice discounting and overdraft facilities. It will also make the guarantee eligible to more sectors. You can also download this information in PDF format here.
Currently under the EFG scheme, the following types of lending can be guaranteed:
    • New term loans, for working capital or investment purposes, with terms of between 3 months and 10 years.
    • Refinancing of existing term loans, where the value of available security is insufficient for the lender to consider refinancing under its normal terms placing the loan at risk, or where for cash flow reasons the borrower is struggling to meet existing loan repayments.
    • Conversion of part or all of an existing utilised overdraft into a term loan in order to release capacity in the overdraft to meet working capital requirements.
 The EFG scheme will now be extended to include guarantees on ‘top-up' invoice finance and overdraft facilities, where appropriate. These will be available via participating lenders.
 
Invoice finance guarantee 'top-up'
 
This will provide a guarantee on invoice finance facilities, supporting an agreed additional advance on your debtor book, to supplement the invoice finance facility already in place.
 
It:
    • provides additional finance of up to £1m 
    • allows an increase in your agreed advance of up to an additional 30%
    • operates over a term of between three months and three years
    • allows repayment either via complete repayment at expiry or staged repayments over the term of facility 
    • requires payment of the EFG premium quarterly in advance on the full facility agreed, irrespective of utilisation.
Overdraft borrowing guarantee 'top-up'
 
This will provide a guarantee on new or increased overdraft borrowing where your business is viable but has inadequate security to meet a lender's normal requirements for the level of overdraft requested.
    • It guarantees overdraft borrowing for new or increased overdraft facilities of up to £1m which the borrower cannot otherwise secure.
    • A guaranteed overdraft can be renewed at the lender's discretion subject to a maximum term of two years, after which EFG overdraft facility must be repaid. 
    • It requires payment of the EFG premium quarterly in advance on the full facility agreed, irrespective of utilisation.
This facility is for small to medium-sized businesses experiencing short-term cash flow difficulties and is primarily aimed at enabling new and/or additional overdraft lending.
 
It may not be available for businesses where an existing overdraft has been reduced or cancelled in the previous three months, or where a new or increased overdraft has been refused in the previous three months.
 
How it will be implemented
 
Existing EFG lenders have been briefed on the criteria for the new guarantees and have the capability to offer them from 1 October 2009 until 31 March 2010.
 
All decision-making regarding the use of EFG in connection with individual lending propositions is devolved to the participating lenders.
 
Before any new facility is offered, the lender is required to confirm that, according to their normal assessment criteria, the potential borrower is a viable business and capable of repaying the facility.
 
Because of the different markets in which they operate, not all lenders will necessarily offer all types of EFG facility.
 
Update on eligibility
 
 From 30 September 2009, the Department of Business, Innovation and Skills (BIS) has made the following changes eligibility:
    • Commission Agents are now fully eligible.
    • Organisations that involve activities to promote sport in general are now eligible.
    • Insurance agents, brokers and intermediaries that do not provide insurance themselves and that are independent of insurance companies are now eligible for EFG funding.
    • Building firms that buy land or property and then sub-contract firms to do the work are now eligible.
    • Businesses that derive their income from owning and letting their own property are not eligible.
Restrictions remain on: 
 
     Agriculture
     Banking, finance and associated services
     Export transactions
     Fisheries
     Forestry
     Formal education
     Insurance and associated services 
     Owning and dealing in real estate Transport.
 
If your business meets the criteria set out above, we encourage you to discuss your options with your bank or invoice finance provider.
 
For more information, members of the FPB can call us now on 0845 130 1722. Have you been rejected for EFG funding?
 
If your application for EFG funding has been rejected and we've not yet heard from you, please get in touch. We'll submit all cases to BIS to highlight the issues our members are experiencing.


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