How to find a Government Business Loan

Finding a Business Loan that suits your business can be complicated because of the number of options available in the market.
 
Whether you’re looking for a Business Loan to grow your business or one to get your business started, there are lots of different providers you can approach.
 
But things aren’t necessarily straightforward when you find a provider you like the look of, because your application can still get rejected.

Why has my Business Loan application been rejected?

There are lots of reasons why your Business Loan application may have been rejected but some of the most common are:

Your credit score
Both your business and personal credit score are likely to be considered when you apply for a loan. They provide a good indication of how risky you or your business are to lend money to.
The age of your business
New businesses can sometimes struggle when applying for loans because they can’t display their ability to pay off debt or the evidence is minimal because they haven’t been trading for long. Some providers require a business to be trading for two years to be eligible for a Business Loan.
You've already got debt or lines of credit
If you already have a number of debt and credit facilities, lenders may be reluctant to add to it because it could impact your ability to repay the loan.
Your sector
Certain sectors are viewed as high-risk by lenders. Some lenders are reluctant to provide finance to businesses that sit within them.
Lack of security
Some Business Loans require security in the form of assets or personal guarantees. If a business doesn’t have assets of sufficient value, or is unable to provide a personal guarantee, they may be refused finance.
Your application isn't well thought out
Lenders may ask to see your business plan and how you plan to use the loan. If your business plan and reason for finance don’t make sense to the lender, or worse, seem incompatible, your application is likely to get rejected.

The above may frustrate you, especially if you’re a relatively young business without a long track record, but the good news is there are several government-backed lenders and schemes that can help if your Business Loan application is rejected.

The Bank Referral Scheme

The Bank Referral Scheme was launched in 2016 to help businesses who have been rejected for finance by one of the major banks in the UK by referring them to alternative providers.
 
Businesses must agree for their details to be shared but if they are, your details will be passed to the following three designated platforms:

  • Alternative Business Funding
  • Funding Options
  • Funding Xchange

Once the application is referred, the platforms will review the information and offer funding if a suitable match is found.
 
Lenders have different appetites to risk, just because one isn’t willing to lend doesn’t mean every lender will have the same approach.

Enterprise Finance Guarantee (EFG)

The Enterprise Finance Guarantee (EFG) facilitates lending to viable, smaller business who have been unable to get finance because they can’t provide the security usually required by lenders.
 
EFG works by guaranteeing 75% of the losses the lender may suffer if the borrower defaults on the facility.
 
To access EFG, a borrower must still apply to a finance provider for a loan, overdraft, Invoice Finance or Asset Finance facility, it’s then up to the finance provider to determine whether or not the application is eligible for EFG.

National and Regional Funds

There are a number of government-backed funds in the UK and they are designed to support smaller businesses in accessing finance.
 
The national funds or programmes are available to smaller businesses across the country, while the regional funds, as you’d expect, are available to smaller businesses within the relevant regions.

British Business Bank regional programmes

The British Business Bank works alongside Local Enterprise Partnerships (LEPs) in the North of England, the Midlands and the Cornwall and Isles of Scilly to deliver three regional development programmes:

  • Northern Powerhouse Investment Fund (NPIF)
  • Midlands Engine Investment Fund (MEIF)
  • Cornwall and Isles of Scilly Fund (CIOSIF)

Each scheme is designed to help smaller businesses within the relevant regions access funding through different forms of finance, including debt and equity finance.

UK Export Finance

UK Export Finance (UKEF) does not lend directly to businesses. Instead, UKEF supports businesses that have been unable to secure finance to export their product or goods through its Export Working Capital Scheme.
 
UKEF provides guarantees to lenders to reduce their risk and increase their appetite to lending.

Start Up Loans

Start Up Loans is a government-backed scheme designed to help individuals start or grow a business.
 
They’re unsecured, personal loans, so you do not need to use any assets as security or provide a personal guarantor either, however you are personally liable to repay the loan amount.

While it’s understandably frustrating to be rejected for finance, there are still options available for viable businesses in the UK.

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