The Enterprise Finance Guarantee explained
If you're finding it difficult to raise finance at the moment,
you're not alone. According to statistics from the Forum of Private
Business (FPB), almost a third of businesses have reported problems
getting access to funding since September 2008. Use this guide to
learn more about the Enterprise Finance Guarantee (EFG), the
government's scheme to encourage banks to lend more to small
What is the Enterprise Finance Guarantee?
- The EFG is a £1.3bn package put in place to replace the old
Small Firms Loan Guarantee (SFLG) to encourage banks to lend
to businesses that are struggling to access finance.
- The scheme will guarantee up to 75% of a loan
between £1,000 and £1m, and is available until March 31, 2010
across 26 lenders
What does it cover?
The EFG covers a range of lending including:
- New loans with terms of up to ten years
- Refinancing of existing loans
- Conversion of existing overdrafts into term loans to free up
How do I know if I'm eligible?
- The EFG is available over a period of three months to three
years to businesses with a turnover of up to £25m
- While there is no official criteria to determine your
business's eligibility - the BERR website says the decision over
whether to lend is 'fully delegated to the participating
lenders', i.e. your bank - you do need to be able to show
them your business is viable.
- You should be able to show an up-to-date business
plan; a good order book and be able to demonstrate a strong
What is it for?
- In contrast to the old SFLG, which provided to help small
businesses grow, the EFG is there to ease cashflow
problems for firms which would ordinarily be able to secure
- If you're looking for growth finance or a
loan to start a new project, approach your bank: the message
from the banks is each business will be assessed on its own
Who isn't eligible?
- Because of a lack of clear lending criteria, it's difficult to
say who would be turned down, but farms or other agricultural
businesses may not be eligible if they have already sourced
finance from the EU
- The advice is to speak to our bank manager as soon
as possible to find out if you qualify
- Prepare to provide the bank with all the information you would
normally provide for a loan application:
- A detailed business plan
- Financial history
- Cashflow projections
- Be ready to explain exactly what you need the money for
- Have figures prepared to show that you will be able to repay
- Consider taking advice from accounting or legal professionals
to improve your chances of securing a loan
If I have been turned down for a loan or refinancing, is
my business likely to get support from the EFG?
It depends: the EFG is designed to help firms which have been
affected by poor liquidity, but which would ordinarily secure a
loan. Do not make any assumptions. Your business will undergo
rigorous assessment. You need to prove your business - even while
it is suffering from cashflow issues - is otherwise strong and
Annual percentage rate (APR): the rate of interest
you will pay on your loan over a year: this will help you determine
the full cost of finance
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