The Small Firms Loan Guarantee (SFLG) is a government-backed guarantee for business loans administered by approved money lenders. It aims to support small to medium-sized businesses that have viable business development plans but lack the assets required to secure conventional loans. In essence, the scheme seeks to facilitate the development of firms with strong potential, but limited borrowing power.
The SFLG guarantees loans, but it does not guarantee that every small to medium-sized business is entitled to a loan. The scheme is administered by private money lenders, from high-street banks to specialist not-for-profit organisations such as the South West Investment Group. Each lender defines their own eligibility criteria and makes their own borrowing decisions. As a result, the decision whether to grant a loan remains a commercial one, which remains solely with the money lender.
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 two per cent premium on the outstanding balance of the loan.
- The ability to guarantee loans of up to £250,000 and with terms of up to ten years.
- Availability to qualifying UK businesses with an annual turnover of up to £5.6 million.
- Availability to businesses in most sectors and for most business purposes, although there are some exceptions.
Source: berr.gov.uk
In March, Budget 2008 announced that the SFLG scheme is extending its eligibility ‘to include businesses with growth aspirations over five years old’. In addition, a temporary 20 per cent increase in available funds was announced. Together, these changes broaden the scope and availability of the scheme, providing more opportunities for access to finance amongst small to medium-sized businesses.
Businesses interested in the SFLG scheme should contact participating money lenders for more information on availability and eligibility criteria.
0 Responses to “Access to finance: The Small Firms Loan Guarantee”