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Enterprise Finance Guarantee Scheme (EFG)

19 February 2009



In January 2009 the Government announced the introduction of the EFG with the intention to encourage banks and other lenders to do more to assist small and medium sized businesses through the current rocky economic conditions.

We set out below the key facets of the EFG and encourage you to contact us if you are interested in applying (or are experiencing challenges with an application) as we can put you in touch with helpful banks and intermediaries.

Please call Simon Deans or David Stanning on 01753 279023 or email commercial@bpcollins.co.uk.

Key points

• Government will guarantee up to 75% of the loan value.

• Loans can be for periods from 3 months to 10 years.

• Businesses with turnover under £25million may qualify.

• Loan amounts are from £1,000 to £1 million.

• EFG can be used to provide extra working capital or to help businesses grow and develop.

• Banks will charge their current interest rates together with an arrangement fee.

• There is an additional premium payable to the Government (for its provision of security) of 2% of the outstanding balance of the loan, assessed and collected quarterly in advance throughout the life of the loan.

• A discount of 25% will be applied to all premiums due and successfully collected during 2009.

• Delivery of EFG, including the decision on whether or not it is appropriate to use in connection with any specific lending transaction, is fully delegated to the participating lenders. There is no automatic entitlement to receive a guaranteed loan and neither is there a pre-qualification process for it.

• The following main lenders will lend to eligible businesses under EFG:-
- Barclays
- Clydesdale/Yorkshire
- HSBC
- Lloyds TSB/HBoS
- RBS/Natwest

• It is probable that other smaller lenders, already active in the SME market, will become lenders under the Enterprise Finance Guarantee in due course.