Enterprise Financec Guarantee EFG

Government guaranteed lending through the new Enterprise Finance Guarantee (EFG) is open to businesses with an annual turnover of up to £25million who are currently not easily able to access the finance they need. This will enable businesses to secure loans of between £1,000 and £1million. Note: all lending decisions will be at the discretion of the bank supplying the loan.

Enterprise Finance Guarantee

Description

The Enterprise Finance Guarantee is a guarantee facility for small businesses intended primarily to improve the availability of working capital through term loans and the consolidation of overdrafts. It will also support lending for business growth and development in cases where a sound proposition may otherwise be declined due to a lack of security.

The guarantee will cover the following types of lending:

• new term loans (with terms of between three 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 (conditional on the lender being prepared to continue to provide an overdraft and the serviceability of both the term loan and the overdraft)

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, and any arrangement fee which they may charge, a premium is payable to the Department for Business, Innovation and Skills (BIS).

The premium is equivalent to two per cent 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 per cent will be applied to all premiums due and successfully collected during 2009.

Delivery of the Enterprise Finance Guarantee, including the decision on whether or not it is appropriate to use it in connection with any specific lending transaction, is fully delegated to the participating lenders. There is no automatic entitlement to receive a guaranteed loan and nor is there any pre-qualification process for it.

The following main lenders will lend to eligible businesses under Enterprise Finance Guarantee:

• Airdrie Savings Bank
• Alliance and Leicester Commercial Bank
• Bank of Baroda
• Bank of Ireland (Northern Ireland)
• Bank of Scotland
• Barclays
• Business Enterprise Fund
• Business Finance Solutions
• Clydesdale/Yorkshire Bank
• The Co-operative Bank
• Donbac Finance
• DSL Business Finance
• First Trust
• Foundation East
• GLE oneLondon
• HSBC
• Lloyds TSB
• NEL Fund Managers
• Northern Bank (Northern Ireland)
• RBS/Natwest
• State Securities
• South West Investment Group
• Triodos Bank
• UK Steel Enterprises
• Ulster Bank (Northern Ireland)
• Whiteaway Laidlaw Bank
• Venture Finance

The government guarantee is a guarantee to the lender.

Value

Up to £1.3 billion of new bank lending will be guaranteed by the Government.

• Eligible businesses are able to borrow between £1,000 and £1,000,000 when this would not otherwise have been possible.

Eligibility

Small businesses in the UK with an annual turnover of up to £25 million are eligible.

Loans for most businesses purposes to businesses in most sectors are eligible. The principal exclusions relate to businesses in the agriculture, coal, and steel sectors, and to the financing of individual export orders. Your lender will advise if any of these restrictions affect your business when they consider your loan application.

Any application will first be assessed via the lender's own commercial criteria before any consideration of the EFG eligibility criteria.

Evaluation

Businesses will need to provide all the information normally required by a lender in connection with a loan application, which will generally involve competing their application form and providing supporting information, typically including your:

• 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

Additional Info

Enterprise Finance Guarantee has replaced the Small Firms Loan Guarantee scheme (note that eligibility for the EFG is expanded from the previous scheme).