A recent announcement has confirmed that the government intends to extend the Enterprise Guarantee Scheme until 2015. This will be a major boost for companies with viable businesses that are also facing funding challenges via traditional routes.
The original aim of the scheme was to encourage the banks to boost lending to the SME sector. The Enterprise Finance Guarantee scheme (EFG) would act as guarantor for up to 75% of the loan.
Companies with up to £25 million in turnover are eligible to apply for anything between £1,000 and £1 million under the EFG in order to support new loans, existing loans or convert an existing overdraft into a loan that is repayable over a period of up to 10 years.
If you think your business may benefit from additional funding then your business needs to have a turnover of less than £25 million. If so, you could be eligible for between £1000 and £1,000,000 via the Enterprise Finance Guarantee EFG scheme.
In turn, the government ultimately hopes that this scheme will help businesses meet their working capital demand.
While the EFG can boost the cash flow of UK businesses there are also a wide range of other funding options available including for example Invoice discounting and factoring.
Critics of the announcement say that this ‘new’ scheme is nothing more than a rebranding of the small firms loan guarantee scheme. Either way, an application is still well worth while if you are struggling to finance your business. In order to apply you approach your bank or business manager. The bank will assess your proposal in the normal way. You will need to have your business plan and projections ready. The business owners need to be in a position where they have no other security in order to be considered. Your personal home may be excluded if it is joint names otherwise your bank may ask for this to be used as security against the loan.
Anecdotal evidence suggests that Nat West/ RBS and Barclays tend to be the most flexible regarding the security requirements. One final point to bear in mind is that the banks will generally charge a 2% premium on the interest to offer this service. In our view this extra charge is a ‘bit rich’ bearing in mind that the security is underwritten by you the tax payer but as they say, any port in a storm!
For mor information visit the business link website
More information on other suorces of finance read here
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