Enterprise Finance Guarantee

Finance Brokers can help businesses with the new Enterprise Finance Guarantee Scheme. In January 2009, the Government launched this new initiative to assist businesses in raising company finance.

EFG is not simply a re-branding of the existing Small Firms Loan Guarantee (SFLG) but a new intervention with a broader scope which places particular emphasis on the current requirement of SMEs for raising company finance. Additional finance has been provided to the Banks to enable them to support the proposal.

SFLG has been suspended until further notice.

Principal Eligibility Criteria

• Borrowing of between £25,001 and £1m may be guaranteed
• For loans granted under EFG the total amount advanced must not exceed a cumulative total of £1m (Any previous SFLG borrowing will not count towards this ceiling)
• Borrowing is open to a business or groups of businesses (new or existing) with an annual turnover of up to £25m. (Eligibility is not constrained by the legal structure of the business)
• Sectoral eligibility will broadly be the same as for SFLG currently
• The borrower must be a viable business capable of servicing the facility being provided in addition to any existing commitments
• Term Loans with terms of between 1 and 10 years may be offered on a capital and interest basis, with interest continuing to be met separately from the operating account

Loan Purpose

• Borrowing purposes remain the same as SFLG, with the addition that refinance of overdraft facilities can now be considered to improve cashflow
• If appropriate, all or part of an existing utilised overdraft may be converted to a term loan providing the Bank is prepared to continue the overdraft facility at the previous level, or at a reduced level
• agreed with the borrower, and that the term loan will be serviceable in addition to the continuing overdraft
• Fees may be added to the loan. These will be included in calculation of the premium payment and also the overall borrowing amount under EFG

Security

• Other forms of security may be held in addition to the EFG guarantee and there is no longer a requirement to split these into separate secured and guaranteed transactions
• If personal security or a personal guarantee is taken specifically in connection with the EFG the Bank must be able to justify the reason for having done so
• The Bank must certify at the time of agreeing the loan that they consider the borrower to be a viable business and that the loan would not have been made without the availability of the EFG guarantee

If you are looking into raising company finance and would like to learn more about EFGs, call us today on: 0871 873 2939.