FAQs: SMEs seeking finance via EFG

I wish to apply for EFG

Businesses may apply for a loan from one of the participating lenders who will assess whether which form of lending, including EFG, is most appropriate. EFG is designed to operate at the margins of banks’ normal lending activity to SMEs, allowing lenders to provide additional loans. The scheme supports viable companies that are at the margins of commercial lending because they have insufficient security or their proposal involves a higher risk of loss at default. It exists to help viable businesses during an unprecedented period of tightened credit conditions, and is not designed for the majority of viable businesses to whom banks should lend; nor is it intended for businesses who are not viable and that banks are rejecting on that basis. List of EFG approved lenders

An EFG loan is a commercial loan from a lender on which the lender has the protection of a Government guarantee. EFG covers:

New loans to finance the development of the business, either as working capital or for specific projects;
Refinancing existing loans to keep them in place when they might otherwise be withdrawn due to diminishing security values, and allowing lenders to restructure a borrower's debt where appropriate;
Moving long term debt from an existing overdraft into a term loan to release capacity in the overdraft to meet working capital requirements.

Information on the main EFG criteria including details of sector restrictions is on the BIS website: Enterprise Finance Guarantee
An interactive tool on the Real Help for Business pages on the Business Link website can provide an indication of eligibility. Real Help for Business Interactive Tool
Business Link staff can offer an opinion but that can only be a guide as it is the lender which makes the final decision.
Lenders have access to a web portal to determine eligibility in individual cases.

EFG rules permit lenders to seek personal guarantees and/or other security in connection with an EFG loan.
The commercial lending practices of each lender will vary, including their requirements on personal guarantees and other security.
Further details on EFG rules in relation to personal guarantees and other security are available on the BIS website: Clarification on the Treatment of Security under EFG
The Government guarantee does not remove the borrower’s obligations in respect of repaying the loan.

The decision on whether or not it is appropriate to use it 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 nor is there any pre-qualification process for it.
Businesses should discuss the reasons with lender to establish whether they have been refused on the lender’s own commercial lending criteria or on failure to meet the EFG rules. If the former then it may be worthwhile to consider approaching another lender.
Businesses that are unable to secure an EFG backed loan from any lender should approach Business Link for information about other options.

Complaints about a particular lender should be resolved with the lender informally if possible, then via the lenders normal complaints procedures if necessary. Borrowers unable to resolve their complaint via these means are able to make a complaint to the Financial Ombudsman's Service (FOS). Alternatively it may be preferable to approach another approved lender.

Bank staff should contact their central processing team or other designated internal expert. Those contacts can obtain further information from CfEL if necessary.

Contact CfEL see website for further details: www.capitalforenterprise.gov.uk.
Opportunity to apply for accreditation is open to the end of June 2009.