Financing growth: the Enterprise Finance Guarantee

Short-term working capital can be a source of strain for many businesses. Yet while many innovative short-term working capital platforms – such as peer-to-business lending – are emerging, some business owners still prefer to keep their lending relationship with one bank.

But if you can’t provide the asset or security backing to secure the loan, or if you don’t have the proven track record, make sure you know about the Enterprise Finance Guarantee.

What the scheme offers

The Enterprise Finance Guarantee (EFG) scheme is a loan guarantee scheme. It provides the lenders with a government-backed guarantee for 75% of value of each individual loan. (There’s a cap on total claims arising from any one lender.) By providing this guarantee, the EFG helps a loan to be made that might not otherwise have been offered.

The guarantee provides protection to the lender in case the borrower defaults. It is not insurance for the borrower in the event that you are unable to repay the loan.

Enterprise Finance Guarantee lenders

There are 44 accredited lenders, including all main UK high street banks, Community Development Finance Institutions (CDFIs) and invoice finance providers. EFG trade credit facilities are available in B&Q and Screwfix stores nationwide, and other trade credit providers across a range of business sectors are being added.

Here is a list of all the lenders.

Eligibility to apply

EfG is available to businesses that operate in the UK, have a turnover of less than £41 million, and are looking for finance in the range of £1,000 to £1 million. The repayment terms can be anywhere between three months to 10 years (although these terms are less for overdraft and invoice finance facilities).

While most sectors are eligible, EfG is subject to certain sector restrictions due to EU State Aid rules. See also a list of the main sector restrictions.

All the decisions about whether your business is appropriate and eligible for the EFG will be made by the lender. The government, although it is providing a guarantee to the lender, plays no part in the decision-making process. The EfG is not a prop for a business that can’t demonstrate its viability to the lender. Nor is it a way of avoiding providing security to the lender that you have, but would rather not put forward!

Enterprise Finance Guarantee resources

The EFG can be very useful scheme for attracting finance when you have little or no security that can you can pledge. In these circumstances, do ask your lender about it. As John Hilliard did: read how the Managing Director of Dudley-based bed business Furmanac used the EFG.

The Business Finance Advice Scheme is run by the three participating accountancy bodies, search their directories to find an expert finance adviser in your local area: