The global economic crisis that shook the banks so fiercely in 2008 was bad news for small business seeking loans. Anecdotal evidence suggests the traditional bank funding lines have all but dried up as the full effects of the credit crunch have taken hold.
In an effort to get banks lending again, the government introduced a number of measures, most notably the Enterprise Finance Guarantee scheme. In effect, the scheme is a reworking of the old Small Firms Loan Guarantee scheme.
The EFG supports up to £1.3bn of new lending to economically viable small businesses that need some funding help. It’s open to businesses with an annual turnover of no more than £25m that are seeking loans of between £1,000 and £1m, repayable over 10 years.
The cash for the loans still comes from the bank, but the difference is the government will underwrite 75% of the loan, which in theory means you have a chance at debt finance even if you don’t have the collateral to back it up.
The EFG covers new loans, refinancing of existing loans or the conversion of part or all of an existing overdraft into a loan.
The scheme is open to businesses in all sectors with the exception of companies in the agricultural, coal and steel sectors, which are bound by state aid rules.
The following banks and lenders are signed up to the scheme and applications should be made directly to them:
- Barclays
- Clydesdale / Yorkshire Bank
- HBOS
- HSBC
- Lloyds TSB
- RBS / NatWest
- Northern Bank
For more information on the EFG click here
