The Enterprise Finance Guarantee (EFG) is the most successful and dynamic scheme for small businesses anywhere in the world. This is a joint venture between the participating lenders and the Department for Business, Enterprise and Regulatory Reform. This program fosters and helps in catalyzing the growth of small and medium scale businesses. Without the availability of adequate capital, the expansion of small businesses is retarded and as they don’t have any assets as collateral they can’t avail conventional loans. This is where the EFG comes in the scenario.
There are 26 members who provide this program, some of the leading one’s are- Barclays Bank plc, Bank of Scotland plc, Bank of Ireland, Clydesdale Bank plc, HSBC Bank plc, One London ltd., The Royal Bank of Scotland, The Co-Operative Bank plc, Yorkshire Bank plc and there are many more.
The criteria and features for the Enterprise Finance guarantee scheme are; the annual turnover for manufacturing and non- manufacturing businesses should be less than £25 million in a financial year. The business should have less than five years of consistent trading existence. The business should not belong to any of the following sectors- agriculture, betting, gambling, real estate, post services, education, fishery, medical field, forestry. Each lender has its own format of application and once the borrower has fulfilled the criteria, the application is processed and loan is sanctioned. The funds are directly transferred to the company. A 75% loan amount guarantee to the lender is covered and the borrower pays 2% premium on outstanding balance of the loan.
The loan provides an ability to guarantee loans of up to £1 million with 10 year term. The documents to be submitted along with the application are latest audited accounts, the business plan, and the company’s financial forecasts. The funds of EFG loans can also be used in converting an overdraft into a loan. The main advantage of EFG is that it is available to businesses that are unable to secure bank lending in current times.
The EFG is a better version of Small Firms Loan Guarantee (SFLG) which is currently suspended and will be proposed in March 2010. The EFG is best suited small business finance for businesses having feasible growth plans and proven fantastic entrepreneurial abilities.
