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. A full list of approved EFG lenders is available on the BIS website List of EFG approved lenders
What form does the funding take and what can a business use it for?
- 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 term loans, where the loan is at risk due to the deteriorating value of security or where the cash flow reasons the borrower is struggling to meet existing loan repayments;
- Moving long term debt from an existing overdraft into a term loan to release capacity in the overdraft to meet working capital requirements;
- A guarantee on invoice finance facilities to support an agreed additional advance on an SME's debtor book. This will supplement the invoice finance facility already in place;
- A guarantee on new or increased overdraft borrowing for SMEs experiencing short term cash-flow difficulties.
I have heard of EFG, but require further information
Is my business eligible for EFG?
- 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.
I have been offered an EFG loan, but am required to provide a personal guarantee and/or other security.
- 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.
I have been turned down for EFG
- 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.
I have a query about my existing SFLG or EFG loan
- Businesses are advised to approach their lender to resolve any queries.
I am unhappy with the service provided by a lender
- 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.
SFLG
What has happened to SFLG?
The Small Firms Loan Guarantee is suspended. The type of lending previously provided under SFLG - to businesses that lack collateral and/or track record - will still be available under the new scheme. Government will be bringing forward proposals for a scheme post March 2010, later this year.
How is EFG different to SFLG?
In short, it offers more help to more businesses - EFG provides loans up to £1 million compared to an upper limit of £250,000 for SFLG and supports businesses with a turnover of up to £25 million compared to £5.6 million under SFLG. Additionally, EFG loans are used to covert an overdraft into a loan. EFG is available to viable businesses that in normal circumstances would be able to secure lending from banks but who cannot secure bank lending in the current times.
Miscellaneous
Bank / lenders’ staff with a query regarding the operation of SFLG / EFG or regarding a particular case
- Bank staff should contact their central processing team or other designated internal expert. Those contacts can obtain further information from CfEL if necessary.
Banks / Lenders seeking to be an approved lender
