New Government-backed Finance

Enterprise Finance Guarantee for Business Owners

As a small to medium-sized enterprise, you may have viable business plans that need funding and for which a loan would be appropriate. However, you may be struggling to access the finance or working capital required because of the additional risks arising from the economic downturn. The newly announced Enterprise Finance Guarantee is intended to overcome this by providing lenders with a government guarantee, mitigating their risk exposure to just 25 per cent of the loan value. The Guarantee is part of the government’s Solutions for Business portfolio and is (supposedly*) available to businesses throughout the UK through approved lenders. *Supposedly, I say, because we have only just started to see evidence of it at the coal face with bank managers.

Participating lenders administer the eligibility criteria and make all commercial decisions regarding borrowing. The decision whether or not to use the Enterprise Finance Guarantee with any loan rests with the lender and follows their commercial assessment of the proposition. You can find out more about the Enterprise Finance Guarantee on the Department for Business Enterprise and Regulatory Reform (BERR) website.

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 first year premium will be 1.5 per cent)
• the ability to guarantee loans from £1,000 to £1 million and with terms of up to ten years
• availability to qualifying UK businesses with an annual turnover of up to £25 million
• availability to businesses in most sectors and for most business purposes, although there are some restrictions

The government has also introduced a package of support and further financial measures as part of its Solutions for Business portfolio. This has been designed to provide help for businesses through the economic downturn. You can find out more in a guide published by Business Link about the support offered by the government’s Real Help initiative.

Subjects covered in the Business Link guide are:

• Introduction
• Loans
• Where to look for a loan
• Obtaining a loan and offering security
• Overdrafts
• Loans from friends and family
• Providing a guarantee for your loan
• Enterprise Finance Guarantee
• Here’s how securing the right loan helped my business develop

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