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Many small to medium-sized enterprises (SMEs) have viable business plans that need funding, for which a loan would be appropriate. However, some SMEs may be unable to obtain a conventional loan because they do not have assets to offer as security.
The Small Firms Loan Guarantee (SFLG) helps to overcome this by providing lenders with a government guarantee against default in certain circumstances.
The SFLG is a joint venture between the Department for Business, Enterprise and Regulatory Reform (BERR) and a number of participating lenders. Participating lenders administer the eligibility criteria and make all commercial decisions regarding borrowing.SFLG Approved Lenders
The cost of the guarantee is two per cent per year on the outstanding amount of the loan, payable to BERR quarterly.
Changes to the SFLG took effect from 1 December 2005 to reflect the recommendations of the Graham Review. You can find out more about the Graham Review at the HM Treasury website.
The main features and criteria of the scheme are:
Availability to qualifying UK businesses with an annual turnover of up to £5.6 million.
The first SFLG Annual Report to Parliament was published on 25 July 2007 and details the impact of the scheme over the last year.