Work Matters: Finance

The Enterprise Finance Guarantee has been introduced by the Government to ensure that viable businesses have access to working capital during a time of tighter lending conditions and attitudes to risk by banks. It is aimed at viable, small- to medium-sized enterprises that are no longer able to access funding as readily.

How does this work?

- Participating lenders administer the eligibility criteria and make all commercial decisions. There is no automatic entitlement to receive a guaranteed loan nor any pre-qualification process for it.

- If appropriate, a guarantee to the lender covering 75 per cent of the loan amount will be provided by the Government.

- Eligible businesses can borrow between £1,000 and £1,000,000 over a term of between one and ten years when this would not otherwise have been possible.

- The guarantee can cover new term loans, existing lending where lenders might not otherwise refinance the debt, and conversion of part or all of an existing utilised overdraft into a term loan.

- It will fund working capital or investment by businesses seeking to grow or develop.

- In addition to capital and interest payments, a premium is payable quarterly in advance to cover the scheme, equivalent to 2 per cent on the outstanding balance of the loan.

- The scheme is available until 31 March 2010.

Evaluation

Businesses need to provide all information normally required by a lender in support of a loan application. This will include:

- A current business plan, including details of the purpose for the loan and details of other financial commitments

- Financial projections

- Historic trading figures

- Statutory and management accounts

- Information on any other publicly funded support received in the last three years.

An interactive tool to access eligibility for all government guaranteed lending schemes is available at www.businesslink.co.uk. For further information go to www.berr.gov.uk