The Small Firms Loan Guarantee (SFLG) scheme gained another member after high street bank Alliance and Leicester signed up to the initiative.
The SFLG is a joint venture between the Department of Trade and Industry (DTI) and a panel of lenders. Alliance and Leicester is to join the scheme from July this year.
The DTI guarantees the loan where the borrower has no other assets to borrow against. The scheme has been the government’s main method of assisting small and medium-sized firms to borrow funds to develop their business since 1981.
In 2006, £225m was lent through the SFLG scheme. However, recent research by independent financier Venture Finance found that only 37% of UK small businesses have heard about the project.
Under the initiative, the government provides a 75% guarantee on the loan provided by the bank. By sharing the risk, the bank and the government work together to provide access to finance that might otherwise have been denied.
The scheme offers aspiring entrepreneurs and business owners a way of obtaining finance if they have a sound business proposition and satisfy normal lending criteria, but do not have the necessary security to secure conventional funding.
“Membership of the SFLG scheme will enable the bank to further increase the support we offer to start-up and young businesses,” said Steve Luty, head of business centres at Alliance & Leicester Commercial Bank.
Luty said the bank’s membership to the scheme ‘could not have come at a better time’ for both the bank and its customers.
© Crimson Business Ltd. 2007
