Small firms loan guarantee SFLG
Have you been turned down by a bank because you don’t have enough
security? The Small Firms Loan Guarantee scheme (SFLG) is a
government backed scheme whereby small to medium sized businesses
can obtain a loan from a bank without providing the usual level of
security the bank would normally need.
The business must have viable business plans that need funding and
there are a number of limitations, BUT this is a well established,
if under utilised alternative to a traditional bank loan,
particularly if no security is available. The Small Firms Loan
Guarantee helps to overcome this point by providing the bank with a
government guarantee against default in certain circumstances.
The Small Firms Loan Guarantee is a joint venture between the
Department for Business, Enterprise and Regulatory Reform (BERR) and
a number of participating lenders – mainly banks; some of whom may
sometimes need some ‘encouragement’ to consider an application
particularly if approached direct. This is another reason why it is
better to use a commercial finance broker to
help ‘package’ the proposal including potentially helping to write
your business plan.
The main features and criteria of the small firm loan scheme are:
- Government guarantee to the lender covering 75% of the loan amount – for which the borrower pays the government a premium of 2% of the outstanding balance of the loan (assessed and paid quarterly), in addition to the interest paid to the lender.
- Loan amounts from £10,000 (£25,001 for Sole Traders and Partnerships) to £250,000.
- Loan term from 2 to 10 years (capital repayment holidays possible).
- Available to qualifying UK businesses with an annual turnover of up to £5.6million and following a government review in 2008, businesses established for more than 5 years are also now eligible.
- Available to businesses in most sectors and for most business purposes, although there are some restrictions.
