With the banking markets in turmoil, businesses are finding it increasingly hard to access the finance they need, particularly working capital. As part of its package of support for small and medium enterprises, the Government has created the Enterprise Finance Guarantee. Under this scheme (which replaces and extends the Small Firms Loan Guarantee Scheme) the Government will guarantee lending to viable businesses for working capital and investment purposes.
The main features of the scheme are as follows:
- £1.3 billion of Government funds made available
- Provided to UK businesses with a turnover of up to £25 million
- Available up to 31 March 2010
- Applies to bank loans of between £1,000 and £1 million
- Loan terms of between 3 months and 10 years
- Loans can be used to support new loans, refinance existing loans or to convert part or all of an existing overdraft into a loan
- Government guarantees 75% of the loan to the lender
- 2% of the outstanding sum payable by the borrower to the Government (payable quarterly in advance) with discounts for prompt payment
- Decision on availability of guarantee fully delegated to participating lenders
- Current scheme participants are Barclays, Clydesdale/Yorkshire Bank, HBOS/Lloyds TSB, HSBC, RBS/Natwest and Northern Bank, but the list is expected to increase soon.
This will be particularly attractive to sound businesses that in normal circumstances might secure funding from banks but are not able to do so in the current credit market turmoil.
For more information or to discuss any aspect of the EFG generally, please contact:
Andrew Clarke, Partner 020 7427 6768
Jon Leggett, Partner 020 7427 6595
Charles Frank, Senior Solicitor 020 7427 6541