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Small Firms Loan Guarantee Scheme

As a small business you may face a dilemma; you are forced to limit the scale of your operations because you cannot get access to loan capital, but the bank will not provide further funds as you have no significant assets to provide as security. The Small Firms Loan Guarantee Scheme could provide a partial solution.

The Government department: BERR (former DTI) will guarantee 75% of a loan made available from one of 29 high street banks, regional development agencies and finance companies. You as the borrower have to pay a premium of 2% of the outstanding capital per year. The lender is not permitted to ask for a personal guarantee against this Government backed loan but it will ask you to pledge some of your business assets such as stock or equipment. The amount of the loan can be anything from £5,000 to £100,000. But if your business has been established for at least two years you can borrow up to £250,000 under this scheme. However, in all cases the period of the loan cannot exceed ten years.

Most businesses with a turnover of up to £3 million, (or £5 million for manufacturers), can qualify for the loan guarantee. Some industry sectors are excluded but service providers such as caterers, estate agents, hairdressers and retailers can now apply. However, if your business employs more than 200 people you will not be eligible for the loan guarantee, as the scheme is aimed specifically at small businesses. You do not have to have a long business record to be considered for the scheme but you will be asked to provide a business plan. We can help you to write this plan and to get the best deal from the bank under this scheme.

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