EFGs extended
EFGs EXTENDED
The new government’s first budget has put the emphasis for economic growth and recovery firmly in the private sector, and has a stated aim to nurture the right conditions to encourage this growth. To that end, the existing facility for Enterprise Finance Guarantee (“EFG”) backed loans has been increased from £500m to £700m.
The purpose behind the scheme is to facilitate loans to small and medium sized enterprises which otherwise would be unable to access normal commercial funding due to lack of security, providing access to working capital for businesses with a viable business plan.
This scheme provides commercial lenders with a government backed guarantee of 75% of the value of the loan, for which the government charges the borrower a premium of 2%.
Loans of between £1,000 and £1m are available for businesses with a turnover of up to £25m, and the majority of business sectors are eligible to apply to the participating lenders, made up of the majority of known names in the financial sector.
Whilst lenders considering making an EFG backed loan are entitled to request an unsupported personal guarantee to support the loan, they may not take a direct charge over a principal private residence, providing a level of comfort to would be entrepreneurs, and their spouses!
This is in addition to the creation of a new Enterprise Capital Fund to support businesses with a high growth potential. This fund will provide over £35m worth of equity capital, with a 2:1 contribution from the government and the private sector respectively, taking the value of these funds over the £250m mark.
