The Enterprise Finance Guarantee Scheme replaced the Small Firms Loan Guarantee Scheme in early 2009 as the credit crunch began to bite. Like its predecessor it is a government backed scheme designed to give small and medium enterprises (SME’s) the opportunity to borrow to establish or expand a business although the necessary security to obtain a commercial loan is not available. The scheme is available through all high street banks and other specialist lenders. Details of the scheme are as follows:
- Available to sole traders, partnerships, limited companies, after normal financing methods have been exhausted. The business or business proposition must demonstrate that it is or will be viable.
- Loan amount is from £1K up to £1M. The facility provides access to working capital either through term loans or the consolidation of existing overdrafts. Repayment terms can be up to 10 years.
- Loans are available to businesses with an annual (or projected annual) turnover of less than £25M.
- The Government, through the Dept of Business, Innovation and Skills, guarantee 75% of the loan. In return for this guarantee they charge a fee of 1.5% per annum on the outstanding loan for 2009, rising to 2% per annum thereafter. These charges are in addition to normal bank charges.
- The lending bank will charge an arrangement fee for the loan plus annual interest – rates will vary but are typically 4% to 5% over bank base rate at the moment.
- Company/personal guarantees – will be required by the bank if assets are available to support the guarantee. Not required if the business or its owners have no free assets.
- Loans are available for both start-ups and business expansions. A sound business case is always required and this will include a detailed business plan, normally covering the next three years.
- As is noted elsewhere on the website, the banks are keen to finance individuals purchasing franchises. EFGS loans can be used for this purpose, and NFS is experienced in assisting such individuals.
NFS can assist with the business planning necessary in order to submit an EFGS loan application, and also in finding the most appropriate lender for your business. This may not be a high street bank as other specialist lenders are authorised to administer the scheme.