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Accounting

UK businesses still ignoring Small Firms Loan Guarantee scheme

Written by Gary Howes

Thursday, 24 July 2008

Accountants reveal that new criteria hasn't raised awareness.

The Small Firms Loan Guarantee (SFLG) is deemed an attractive form of finance for business clients by 66 per cent of UK accountants according to an independent study by Venture Finance. Yet despite the positive feeling around the scheme, of those accountants surveyed, none had clients currently using the scheme.

The SFLG provides up to £250,000 for companies with minimal business assets or a lack of security, making it a vital resource for many businesses.

In April the Government announced major changes to the rules around the SFLG Scheme. The previous 5-year rule is no longer applicable to new loan applications making the scheme open to many more businesses with a turnover up to £5.6m. The Chancellor also announced a 60% increase in SFLG funding available.

Despite these changes that work to the benefit of UK businesses, it seems that there is a still a huge proportion that are unaware of it. More than a third (36 per cent) of the accountants surveyed did not know about the scheme or the benefits it could deliver to their clients, suggesting that there is still has a lot of work to do in educating people of its existence..

Peter Ewen, Managing Director Venture Finance comments: "As the first independent invoice financier to be authorised as a lender of the SFLG, we have witnessed firsthand the positive impact this injection of funds can have on a company. Given the benefits that the SFLG can deliver, and the recent improvements that have been introduced, it's disappointing that so many still don't know about it.

"17 per cent of the accountants we spoke to are already recommending the scheme and it would be great to see this figure grow. As one of the key sources of financial advice to businesses there is a real opportunity for accountants to play an important role in providing unbiased guidance on funding options and support throughout the SFLG application process."

About SFLG

Many small to medium-sized enterprises (SMEs) have viable business plans that need funding, for which a loan would be appropriate. However, some SMEs may be unable to obtain a conventional loan because they do not have assets to offer as security.

The Small Firms Loan Guarantee (SFLG) helps to overcome this by providing lenders with a government guarantee against default in certain circumstances.

The SFLG is a joint venture between the Department for Business, Enterprise and Regulatory Reform (BERR) and a number of participating lenders. Participating lenders administer the eligibility criteria and make all commercial decisions regarding borrowing.

The main features and criteria of the scheme are:

A guarantee to the lender covering 75 per cent of the loan amount, for which the borrower pays a two per cent premium on the outstanding balance of the loan.

The ability to guarantee loans of up to £250,000 and with terms of between two and ten years.

Availability to qualifying UK businesses with an annual turnover of up to £5.6 million.

Available to businesses in most sectors and for most business purposes, although there are some restrictions.