Government Funding: Loan Guarantee Schemes and Equity Funds

In January 2009, the Government introduced measures to give small and medium-sized businesses (SME’s) access to up to £20bn in bank loan finance, aimed at helping companies during the credit crunch. These measures are the Enterprise Finance Guarantee Scheme (EFG), the Working Capital Scheme (WCS) and the Capital for Enterprise Fund.

The Business Secretary, Lord Mandelson, announced three measures, saying they are designed to tackle the cash flow, credit and investment needs of businesses.

Enterprise Finance Guarantee Scheme (EFG)

Enterprise Finance Guarantee Scheme (EFG) is aimed at securing up to £1.3bn of additional bank loans to for businesses with a turnover of up to £25m. The EFG scheme will guarantee 75 percent of loans, with banks covering the remaining 25 percent. The EFG builds on a £1bn fund, announced in November 2008, which was originally intended to assist exporting companies while they waited for overseas companies to pay outstanding invoices. According to the statement from BERR, it is intended to help "smaller, credit-worthy companies which might otherwise fail to access the finance they need for working capital or investment finance due to the current tight lending conditions". The Enterprise Finance Guarantee Scheme (EFG) appears to be son of the long established Small Firms Loan Guarantee Scheme (SFLG).

Working Capital Scheme (WCS)

A £10bn Working Capital Scheme (WCS) that the government claims will secure up to £20bn of short-term lending to companies with a turnover of up to £500m. It expands a scheme announced by the chancellor in November 2008, to support a £1bn bank facility for smaller exporters. This has now been opened up to more businesses and lending, and not just exporters.

Capital for Enterprise Fund

The Government and banks will invest £75m (£50m from the Government and £25m from banks) in viable companies that have high levels of existing debt through the Capital for Enterprise Fund. This is an expansion of a £50m scheme originally announced by the chancellor to help small businesses to convert debt into equity. In the private sector, Business Angels are an alternative option.

The banks that expect to participate in and administer the schemes initially are RBS/Natwest, Barclays, Clydesdale/Yorkshire Bank, HSBC, Lloyds TSB, HBOS, and Northern Bank.

Strategy Corporate Finance has many years experience of assisting clients to obtain Government Loan Guarantee Schemes and Funds, with a success rate of over 90%.

We can only help with funding and advice for sums over £100,000. For enquiries below £100,000, please contact your nearest Business Link.

If you would like to know more about our range of corporate finance services contact us today on 0845 838 0936 or drop us an email.