The Enterprise Finance Guarantee Scheme aims to help smaller businesses, currently struggling to secure finance, to get bank loans of up to £1 million.
With the banks reluctant to extend loans in the current financial climate, the government has announced the launch of the Enterprise Finance Guarantee Scheme (EFG), as part of an effort to stimulate bank lending to businesses.
The scheme, which launches in January 2009, aims to help credit-worthy companies which might otherwise not be able to access the finance they need for working capital or investment finance due to the current tight lending conditions.
Under the EFG scheme the government will guarantee 75% of any loans made, with the bank covering the remaining 25%. The guarantees will mean that the government, or taxpayers, will pick up three-quarters of the the tab for any bad loans.
In total, the Enterprise Finance Guarantee Scheme will see the Government provide £1 billion of guarantees to support to £1.3 billion of bank lending.
Enterprise Finance Guarantee Scheme – details
- The Enterprise Finance Guarantee will apply to loans, and can also be used to convert existing overdrafts into loans to enable businesses to free up their current overdraft facilities to meet working capital demands.
- The Enterprise Finance Guarantee is available to businesses with an annual turnover of up to £25m. Firms can apply for loans of up to £1million and loans can be repaid over a period of up to 10 years.
- The guarantee will be available through the following high street banks; Barclays, Clydesdale/Yorkshire Bank, HBOS, HSBC, Lloyds TSB, RBS/Natwest and Northern Bank. It will become available from other lenders if they wish to apply.
- The Enterprise Finance Guarantee Scheme will initially be open until 31 March 2010.