More than £3bn lent to small businesses through Government scheme

07/11/2017

Smaller businesses that would previously have struggled to obtain finance have now accessed more than £3bn through the British Business Bank’s Enterprise Finance Guarantee (EFG) scheme.

The Government initiative provides loans of between £1,000 and £1.2 million to smaller businesses who would have been – or already have been – turned down for a loan or other form of debt finance because they were not able to provide sufficient security for the loan.

To date it has provided over 28,300 business loans, at an average value of £105,000, to allow smaller businesses across the UK to successfully grow their business.

Margot James, the Small Business Minister, said: “Building an economy that works for all is an important part of our Industrial Strategy, which is creating the conditions for businesses to start up and grow right across the country. Today’s £3 billion lending milestone shows just how much Government support is available to help ensure small businesses get the access to finance they need to succeed.”

Mike Cherry, Federation of Small Businesses (FSB) National Chairman, urged lenders to embrace and promote the initiative.

He said: “This milestone is testament to the fantastic work that the British Business Bank does right across the UK. The Bank facilitates vital access to finance for thousands of small firms, particularly in areas of the country where investment is harder to secure. The £3 billion of lending backed by the Enterprise Finance Guarantee is a critical lifeline for our small business community.”

What is the Enterprise Finance Guarantee?

Introduced in 2009, the British Business Bank’s Enterprise Finance Guarantee (EFG) facilitates business finance to smaller businesses that have a sound borrowing proposal and robust business plan but are unable to obtain finance from their lender due to having insufficient security to meet the lender’s normal requirements.

EFG supports a wide range of business finance products, including:

• Term loans
• Revolving facilities, such as overdrafts
• Invoice finance facilities
• Asset finance facilities

How does it work?

There are around 40 accredited lenders on the scheme. These lenders range from high-street banks, to challenger banks, to asset based lenders, through to smaller specialist local lenders.

If the EFG lender can offer finance on normal commercial terms without the need to make use of the EFG, they will do so.

Where the small business has a sound borrowing proposal but no, or inadequate security, the lender will consider the small business for support via the EFG.

The EFG provides the lender with a government-backed 75% guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.

The borrower pays a 2% Guarantee Fee as a contribution towards the costs of the scheme.

Who is eligible?

To be eligible for support via EFG, the small business must:

• Operate in the UK
• Turn over less than £41 million annually
• Be looking for finance between £1,000 and £1.2 million
• Want repayment terms between 3 months to 10 years (though this is less for overdraft and invoice finance facilities)
• Operate within an eligible industrial sector – wholesale and retail are the most popular sectors lent to via the scheme, followed by manufacturing
• Have a sound borrowing proposal and robust business plan, but inadequate security to meet a lender’s normal requirements
• Be able to confirm that they have not received other public support of de minimis State aid beyond a particular threshold depending on the sector (usually euro 200,000 equivalent) over the previous three years

If you are interested in finding out more about whether your business is eligible for funding under the Enterprise Finance Guarantee, call us on 0800 9774833 or email info@hiltonbaird.co.uk. As an independent commercial finance broker, we can assess your funding requirements and introduce the most suitable lender and solution for your needs.