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Sources of Finance for Small Businesses

The UK's financial markets are amongst the most dynamic and flexible in the world, meeting the needs of most small businesses. However, in the current economic climate some small businesses - particularly start-ups and those lacking a track record or without collateral - can struggle to access finance.

Real Help With Finance

Following the Government’s announcement in the November 2008 pre budget report, a package of support to address the cash flow, credit and capital needs of small businesses has been launched under the Real Help for Business campaign:

Enterprise Finance Guarantee

Government guaranteed lending through the new Enterprise Finance Guarantee is open to businesses with an annual turnover of up to £25million who are currently not easily able to access the finance they need. This will enable businesses to secure loans of between £1,000 and £1 million.

Working Capital Guarantee Scheme

Government is also making available to banks guarantees of up to £10bn, which will support bank lending of up to £20bn. The purpose of this facility is to secure lending and to release capital which banks can redeploy in order to increase all types of lending above their current plans to businesses with a turnover of less than £500m.

Capital for Enterprise Fund

The Government has launched a £75 million Capital for Enterprise Fund with £50 million of Government funding which will allow companies to fund business development by selling debt in exchange for an equity stake in their business. The fund will provide equity and quasi-equity of £250,000 and £2million for companies of up to £50m turnover who have viable business models and growth potential in need of long term capital. Further information is available by phoning 0845 4599780

Enterprise Capital Funds

Since 2006, the government has established a multi-million pound equity finance scheme, Enterprise Capital Funds (ECFs), to enable funding, of up to £2 million, for businesses that require investment that falls within the ‘equity gap’ – more than business angels can supply and less than venture capitalists would consider.

Regional Loan Transition Fund (England only)

This is a £25 million initiative to help businesses at a regional level up to the end of June 2009. These funds are administered by Regional Development Agencies (RDAs) and provide loans in cases where all commercial lending options have been exhausted.

For further information about these schemes please visit The Real Help With Finance pages on Businesslink’s website.

Small businesses with growth potential may also have difficulty raising risk capital needed to fund their ambitions for growth. The Government is working to understand and remove the barriers that can prevent finance being raised to fund viable business propositions.
The best place for small businesses to find out what grants are available for a specific business is through the Business Link website's finance and grants pages.

Grant for Research and Development

Grant for Research and Development is the DIUS initiative that provides grants to help individuals and small and medium-sized businesses to research and develop technologically innovative products and processes. This initiative replaced the Smart scheme which formally closed to applications on 31 August 2003.

Details of grants, funds and loan guarantee schemes with which the Enterprise Directorate is involved are detailed below.

Community Investment Tax Relief

For individuals and corporate bodies investing in accredited Community Development Finance Institutions (CDFIs).

Community Investment Tax Relief

Early Growth Funds

Object is to increase availability of small amounts of risk capital: on average £50,000 for specific industries.

Early Growth Funds

Late Payment

Legislation does not prevent business from setting own terms with customers, including level of interest charged.

Regional Venture Capital Funds

England-wide programme provides amounts to £500,000 for SMEs that show growth potential.