The Enterprise Finance Guarantee (EFG) is a loan guarantee scheme intended to facilitate additional bank lending to viable SMEs with insufficient or no security with which to secure a normal commercial loan.
Under EFG, the following facilities can be guaranteed, repayable over a period of between three months and ten years until otherwise indicated:
New term loans (unsecured and partially secured) for working capital or investment purposes
Refinancing of existing term loans, where the loan is at risk due to deteriorating value of security or where for cash flow reasons the borrower is struggling to meet existing loan repayments
Conversion of part of all of an existing utilised overdraft onto a term loan in order to release capacity in the overdraft to meet working capital requirements
Invoice Finance Guarantee providing a guarantee on invoice finance facilities to support an agreed additional advance on an SME's debtor book, to supplement the invoice finance facility on commercial terms already in place. (Available for terms up to three years)
Overdraft Guarantee providing a guarantee on new or increased overdraft borrowing where the SME is viable but has inadequate security to meet a lender’s normal requirements for the level of overdraft requested.. (Available for terms up to two years)
An EFG lender may not necessarily offer the full range of lending types provided for under the EFG rules if they are not compatible with their normal commercial lending practices.
EFG supports lending to viable businesses with an annual turnover of up to £41m seeking loans of between £1,000 and £1million. It is available to businesses in most business sectors. However, EFG is subject to certain sector restrictions arising from the EU de minimis State Aid rules, the Industrial Development Act 1982 (which provides the statutory basis for EFG) and also for national policy reasons. A list of the main sector restrictions is provided in the EFG Business Sectors web page: www.british-business-bank.co.uk/ourpartners/supporting-business-loans-enterprise-finance-guarantee/understanding-enterprise-finance-guarantee/.
EFG is used by lenders when addressing the debt finance requirements of viable businesses which although they do not have sufficient security, can demonstrate to the lender that they have capacity to ultimately repay the loan in full.
The loan terms will vary depending on the lender.
There are a number of participatin lenders.
Businesses seeking debt finance can approach one or more of the participating lenders.