
The Department for Business has asked us to publish this guidance for SMEs who want to benefit from the scheme:
What is it?
The Enterprise Finance Guarantee (EFG) is a Government loan guarantee scheme to enable lending to small and medium sized enterprises (SMEs) which can demonstrate that they have sufficient cash-flow to meet lenders loan affordability requirements, but are lacking adequate security to obtain a commercial bank loan. Since EFG was launched in January 2009, more than 20,000 SMEs have been offered loans, generating more than £2bn worth of additional lending. There is currently £500m of funding available. All of the main high street banks plus a number of other lending institutions offer EFG loans, which are provided with the support of a Government guarantee. They provide businesses with funding that they might not otherwise have had access to, and can be used in a variety of ways – from employing and retaining staff to investing in new equipment or work space. It can also be used to help fund day-to-day running costs.How it works and who can apply
All EFG loans are provided by the participating lenders using their own funds. The Government provides the lender with a 75 per cent guarantee for each loan, but the borrower remains liable for repayment of 100 per cent of the loan. EFG loans are available to a wide variety of businesses. However, the following criteria applies:- The business must have an annual turnover of less than £41m, but there is no limit on the number of employees;
- The business activity being financed must take place in the UK, although the SME itself might be foreign owned or registered abroad; and
- The borrower contributes to the cost of the scheme by paying a two per cent per annum premium which is in addition to the fees and charges applied by the lender.
How to apply
When does it need to be paid back?
EFG loans have repayment terms between three months and ten years. Lenders follow their standard commercial lending practice, meaning the majority of EFG loans will be repaid on a monthly basis. Lenders have the flexibility to offer capital repayment holidays and bullet repayments (where the business pays back the loan in a lump sum at the end of the term) if they so desire. Image sourceShare this story