If for any reason a small to medium company with a clear business plan requires a loan, and is struggling to get one from a lender, there is a solution. The credit crunch has had an affect on most of. That is where the government Enterprise Finance Guarantee can help.
The loan guarantee scheme, run under Department for Business, innovation and skills provides lenders a government guarantee for 75% lenders exposure on non individual loans. If you can provide 25% collateral, the rest is guaranteed by the government scheme. Set up January 2009, the aim was to keep the economy running during the recession.
The company applying will have a turnover of up to £25million and are seeking a loan of between £1000 to £1million and struggle to get a loan because they do not have collateral. The company will prove ability to repay, and then it is at the discretion of the lender whether the government loan guarantee is appropriate. If loan is approved this way, a premium of the 2% is payable to BIS.
Since the coalition government took office, the scheme is set to continue and more money has been set aside from April 2011. Businesses will be able to access money quicker because the lender will have 20 days to process the application. Another change is that the lenders allowed to participate will increase to include smaller and specialist lenders. All this is to encourage investment and growth as the economy recovers.
There are specific facilities that are guaranteed and repayable over certain period of time;
- New term loans
- Refinancing of existing term loans
- Conversion of part of all of an existing utilised overdraft
- Invoice Finance Guarantee
- Overdraft Guarantee