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Enterprise Finance Guarantee

We provide information on enterprise finance guarantee covering all aspects of the EFG scheme including EFG loans.

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Under the Enterprise Finance Guarantee (EFG), the Government guarantees lending to viable businesses to ensure that they can get the working capital and investment they need, where a sound proposition may otherwise be declined due to a lack of security.

The EFG can be used to 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 was extended to include guarantees on 'top-up' invoice finance and overdraft facilities, where appropriate. 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 Business, Innovation and Skills. 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.

EFG availability

The EFG is available through high street banks.

EFG 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.

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.

We continually campaign to improve the flow of credit and to ensure that it reaches the businesses that need it. We've had a lot of members calling us about their frustrations with the banks and have been able to raise the issues with the government and the banks themselves. Plus, we have been able to put members in touch with national press and contact their banks directly if we have felt members have been treated unfairly.

Members can send their examples to us at PublicAffairs@fpb.org. To find out how the Forum can help you find and access appropriate sources of funding call us on 01565 626001.

Last updated 4th July 2016.

 

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