Enterprise Finance Guarantee Scheme

Search Site

Services Available breadcrumbs

Legal Updates (Business) breadcrumbs

Enterprise Finance Guarantee Scheme

The Enterprise Finance Guarantee Scheme

– It Could Be For You?

What is it?

The Enterprise Finance Guarantee Scheme (“the Scheme”) was launched in January 2009 and is aimed at providing businesses with access to finance, which they might not otherwise be able to secure primarily because of the absence of tangible security. The Scheme has been initially set to run until 31st March 2010 and aims to assist credit worthy and viable companies in place of the now suspended Small Firm Loan Guarantee Scheme. Up to £1.3 billion has been made available under the Scheme to support bank lending with the decision to lend remaining with the individual banks. All the major high street banks are registered to offer the Scheme, under which the government will guarantee 75% of any loans made to eligible businesses.

Who is eligible?

Businesses with a turnover of up to £25 million are eligible with fewer exceptions than the previous Small Firm Loan Guarantee Scheme. Loans can be for between £1,000 and £1 million and for between three months and ten years with possible capital repayment holidays negotiable in certain circumstances.

It is important to note, however, that decisions to lend within the Scheme rest with the individual banks and their primary concern will be with the viability of the business and its ability to service the debt. Up to date financial information, forecasts and a business plan will help to support a business’ case and will usually be required.

Once the viability of a business has been established by the bank, it will not, however, consider lending under the Scheme until all available personal assets have been pledged behind conventional bank borrowing and a guarantee may still be required for part/all of the scheme loan depending on the financial commitment to the business of the shareholders and directors.

Is it for you?

Although the Scheme has received some adverse publicity, many businesses have benefited from support under its umbrella and whilst not all banks are interpreting the rules in exactly the same way, if a business can demonstrate viability and the directors are prepared to provide personal guarantees and pledge personal assets where required, (for which independent legal advice should be sought) then there is a sound basis to approach your bank with a proposition for funding under the Scheme.

Graham Laurence of Graham Laurence Advisory is passionate about the Scheme and says ‘’the launch of the Enterprise Finance Guarantee scheme is timely because the Small Firm Loan Guarantee Scheme had become tired and under used. The challenge though is to raise the level of understanding and awareness within the MK market place so that firms that qualify for support don’t miss out on some vital potential additional funding and are not put off totally by what they read in the press’’