Small Firms Urged To Consider Loan Guarantee Scheme

Fri, 12 Jun 2009

A Midlands business adviser has urged small firms struggling to obtain loans to consider the Government’s Enterprise Finance Guarantee scheme.

Andy Kay, corporate finance director at the Midlands office of accountant Horwath Clark Whitehill, said many small companies struggling to access finance would do well to consider the business loan initiative.

He said: "Even where banks do have cash available, and most of the majors seem to be saying they are still approving new lending, we are seeing that their attitude to risk is not what it once was."

"Extra covenants and conditions are being included in the terms, and pricing is high relative to the falling base rate ."

He continued: "Under the enterprise finance scheme, businesses can borrow between £1,000 and £1 million, repayable over a period of up to ten years. This surpasses the £250,000 upper limit previously set with the much criticised Small Firm Loan Guarantee scheme, condemned for its lack of availability."

"The Government will guarantee 75 per cent of the lender’s exposure on individual qualifying loans, but borrowers have to pay a two per cent annual premium for the facility, although this will be discounted by 25 per cent to all premiums due and successfully collected during 2009."

"This is in addition to the capital/interest payments and arrangement fees payable to the lender ."

"The guarantee covers new term loans, conversion of overdrafts with a view to releasing capacity to meet working capital requirements, and existing finance where lenders may not otherwise refinance the debt ."

The Enterprise Finance Guarantee scheme is available for small to medium-sized businesses in the UK – those with annual turnover of up to £25 million.
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