Jul 11
Finance For Small Businesses
Raising finance is a constant headache that I am told about whenever I see my clients and is for most small businesses whether that be starting off afresh or trying to grow to the next stage of development. For those of you that have ever tried to raise finance for such occasions you will find that you are likely to be asked to put up a personal guarantee – or PG for short. PGs typically take the form of the equity in one’s home – but what if you don’t have any or don’t have enough? Where does that leave your fantastic business opportunity??? Well there may be an answer in the form of the Small Firms Loan Guarantee Scheme (or SFLG or sometimes referred to as SFLGS) which helps to overcome this by providing lenders with a government guarantee against default in certain circumstances.
The SFLG is a joint venture between the Department for Business, Enterprise and Regulatory Reform (BERR) and a number of participating lenders. For a list of SFLG participating lenders visit the BERR website http://www.berr.gov.uk/bbf/enterprise-smes/info-business-owners/access-to-finance/sflg/page37617.html - Opens in a new window. Participating lenders administer the eligibility criteria and make all commercial decisions regarding borrowing.
The main features and criteria of the scheme are:
a guarantee to the lender covering 75 per cent of the loan amount, for which the borrower pays a 2 per cent premium on the outstanding balance of the loan, payable to BERR
the ability to guarantee loans of up to £250,000 and with terms of up to ten years
availability to qualifying UK businesses with an annual turnover of up to £5.6million
availability to businesses in most sectors and for most business purposes, although there are some restrictions
The scheme was changed slightly by our friend Mr Darling in his first budget earlier this year to make it easier for businesses to access the finance avaialble under this scheme. Only trouble is that many of the lenders aren’t aware of this because “head office” hasn’t told them and hasn’t sent them the new stationery with the new criteria! Just so you know – one of the main changes to the scheme was regarding the length of time a company can be trading and still be eligible. This used to be a maximum of 5 years but this restriction has been removed and any age of business is elegible. So if your bank manager tells you that you aren’t eligible then refer him to the relevant section in HM TReasury’s budget report. Details are
The full report is available to download from HM Treasury at http://www.hm-treasury.gov.uk/budget/budget_08/report/bud_bud08_repindex.cfm
then click on “Complete Budget 2008 report” to download. You will find this excerpt on page 43 of the report.
Access to finance
3.7 Budget 2008 announces an access to finance package to ensure that small and growing firms have access to the resources they need: a temporary 20 per cent increase in the funds available through the Small Firms Loan Guarantee (SFLG); •• extending eligibility for SFLG to businesses with growth aspirations over five years old;
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