Enterprise Finance Guarantee: Facilitating lending to the UK’s smaller businesses
Since its launch in 2009, the British Business Bank’s Enterprise Finance Guarantee (EFG) has supported the provision of over £3.3bn of finance to more than 35,000* smaller businesses in the UK. At Budget 2017 on 22 November, the Government announced it will extend the programme for a further four years , enabling us to guarantee up to £2bn of lending over that time. We will be taking on new lenders and offering a new asset finance option, which will enable us to further diversify the lending available to smaller businesses that want to invest and grow.
EFG facilitates lending to smaller businesses that are viable but unable to obtain finance from their lender due to having insufficient security to meet the lender’s normal security requirements.
In this situation, EFG provides the lender with a government-backed guarantee of up to 75%, against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’.
EFG supports a wide range of business finance products, including:
- Revolving facilities, such as overdrafts
- Invoice finance facilities
- Asset finance facilities
To be eligible for support via EFG, the small business must:
- Be UK based, with turnover of no more than £41 million per annum
- Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support)
- Have a sound borrowing proposal but have inadequate security to meet a lender’s normal requirements
- Be able to confirm that they have not received other public support of de minimis state aid beyond €200,000 equivalent over the previous three years
EFG guarantees loans to fund the future growth or expansion of a business, from £1,000 to £1.2 million. Finance terms are from three months up to 10 years for term loans and asset finance and up to three years for revolving facilities and invoice finance.
Note: A limited number of further eligibility restrictions to apply. Full details can be found here.
How does a small business apply for an EFG-supported borrowing facility?
It’s simple to apply and should take no longer than a standard loan application.
Any small business interested in EFG should, in the first instance, approach one of the 40+ EFG accredited lenders with their borrowing proposal.
If the EFG lender can offer finance on normal commercial terms without the need to make use of EFG, they will do so. Where the small business has a sound borrowing proposal but no, or inadequate security, the lender will consider the small business for support via EFG.
Decision-making on whether a small business is eligible for EFG is fully delegated to the 40+ accredited EFG lenders. These lenders range from high-street banks, to challenger banks, to asset based lenders, through to smaller specialist local lenders.
- As with any other commercial transaction, the borrower is always responsible for repayment of the full value of any facility supported by EFG
- The EFG guarantee is to the lender and not the small business
- All small businesses supported via EFG are required to pay a 2% annual fee to the government, as a contribution towards the cost of the scheme
- This fee is payable on a quarterly basis and is collected by direct debit, directly from the small business’s bank account
* As at end December 2017.