Enterprise Finance Guarantee
Please note: The Enterprise Finance Guarantee (EFG) has now replaced the Small Firms Loan Guarantee (SFLG).
 
Under the Enterprise Finance Guarantee (EFG), the Government will guarantee lending to viable businesses to ensure that they can get the working capital and investment that they need, where a sound proposition may otherwise be declined due to a lack of security.
 
The EFG will cover:
    • new term loans of between one and ten years;
    • existing lending where lenders might not otherwise refinance the debt;
    • 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. This is conditional on the lender being prepared to continue to provide an overdraft and the viability of both the term loan and the overdraft.
From 1 October 2009, the EFG will be extended to include guarantees on 'top-up' invoice finance and overdraft facilities, where appropriate. Click here for more information on these changes.
 
The guarantee will fund:
    • working capital;
    • investment by businesses seeking to grow or develop.
In addition to regular capital and interest payments to your lender, plus any arrangement fee, a premium will be payable to the Department for BERR.
 
This is equivalent to 2% per annum on the outstanding balance of the loan, assessed and collected quarterly in advance throughout the life of the loan.
 
A discount of 25% will be applied to all premiums due and successfully collected during 2009.
 

Availability

 
The EFG is available through the following high street banks now:
    • Barclays
    • Clydesdale/Yorkshire Bank
    • HBOS
    • HSBC
    • Lloyds TSB
    • RBS/Natwest
    • Northern Bank
It is likely that a significant number of existing smaller SFLG lenders will also become lenders under the EFG in due course.
 

Eligibility

 
The scheme is available to UK businesses with a turnover of up to £25 million who are currently not easily able to access the finance they need. It will enable them to secure loans of between £1,000 and £1 million. Availability has been extended under the new coalition Government.
 
Loans for most businesses purposes to businesses in most sectors are eligible. Your lender will advise if any restrictions affect your business when they consider your loan application.
 
Participating lenders are fully responsible for the decision on whether or not it is appropriate to use the EFG in connection with a loan. There is no automatic entitlement to receive a guaranteed loan and there is no pre-qualification process for it.
 
For an initial assessment of your eligibility, use Business Link's online tool. You can print off the results and take them with you to your bank.
 

Evaluation

 
You will need to provide all the information normally required by a lender in connection with a loan application, which will generally include providing the following supporting information:
    • a current business plan, including details of the purpose for which the loan is required and details of other investment in and financial commitments of the business;
    • financial projections;
    • historic trading figures;
    • statutory and management accounts;
    • information on any other publicly funded support received by your business within the past three years.
If your business has been dissuaded from applying for the scheme or had an application for EFG funding turned down, tell us your experiences here.
 
What has happened to SFLG?

The SFLG has been suspended. The type of lending previously provided under SFLG – to businesses that lack collateral and/or track record – will still be available under the new scheme. Government will bring forward proposals for a scheme post March 2010 later this year.
 
How is Enterprise Finance Guarantee different to SFLG?
 
It offers more help to more businesses – the EFG provides loans up to £1 million compared to an upper limit of £250,000 for SFLG and supports businesses with a turnover of up to £25 million compared to £5.6 million under SFLG. Additionally EFG loans can be used to convert an overdraft into a loan. EFG is available to viable businesses that in normal circumstances would be able to secure lending from banks but who cannot secure bank lending in the current times.
 
What is the Enterprise Finance Guarantee scheme?