Does your business need a loan?

If you run a small or medium-sized business then you may well have found yourself in the position of having plans for the future of your business but without the necessary funding to put those plans into action. It is often the case, particularly with a relatively new business, that a conventional loan is out of reach because there are no assets to offer as security.

The Small Firms Loan Guarantee (SFLG) was introduced to get over this problem by providing lenders with a government guarantee against default. It was established in 1981 as a joint venture between the Department of Trade and Industry (DTI) and participating lenders. Over 100,000 guarantees have been issued since the SFLG was launched supporting £4 billion of lending to over 90,000 businesses. The SFLG guarantees 75% of the loan and the borrower pays a premium of 2% of the outstanding loan per annum to the DTI.

Some important changes have recently been made to the SFLG. They are intended to widen use of the scheme and took effect in December 2005. Here are the main ones:

• introduction of a single lending limit of £250,000 (previously limited to £100,000 for businesses under two years old)
• an increase in the turnover limit for all eligible businesses to £5.6 million (previously £5 million for manufacturing and £3 million for other businesses)
• the availability of the SFLG now limited to businesses under five years old (previously there was no such restriction).

Please talk to us if you would like any further information on any aspect of the SFLG.