Launched in 2009, the Enterprise Finance Guarantee Scheme (EFG) offers businesses the opportunity to obtain a loan (under the bank’s normal lending criteria) where they do not have the required security.
The Government will guarantee 75% of the loan with the bank taking the remainder of the risk.
Who can take advantage of the scheme?
It is available for businesses with an annual turnover of up to £41 m seeking loans between £1000 - £1,000,000. According to recent statistics from the Department for Business Innovation and Skills, the retail and the manufacturing industry received more than 40% of the loans given out. It has proved particularly useful for start-ups and businesses who have been operating for more than 5 years and are looking to grow the business.
How can my business stand the best chance of getting EFG funding?
- Be Prepared
Most businesses get rejected because they are ill-prepared when they meet the participating lenders. Remember EFG loans typically require all the same information that banks need to process a commercial loan application.
At your meeting remember to supply an information pack which should include:
- The last three years statutory accounts (if applicable)
- The latest management accounts
- A Business Plan clearly demonstrating the need for the finance
The business plan should include analysis of the market, details of the business, the management team, marketing plan and most importantly a three year forecast of profit and loss, the balance sheet and a cash-flow forecast. This must clearly demonstrate where the funding is required, what it will be used for and of most importance to the bank how and when the finance will be repaid.
You need to give the lender the confidence that your business proposals are realistic and achievable. You also need to instil confidence about the experience and skills of the management team as much as the business itself. Make sure any skills gaps in the organisation structure are identified and filled by bringing in additional support i.e. financial strategic support.
- Be clear and concise – don’t be vague
Make sure you are clear exactly how much funding you need. It may sound obvious but some business owners have gone in to meetings asking how much the bank can lend them!
Finally, good luck!
Bobby Lane is a partner at Accountants and Business Advisors firm Shelley Stock Hutter LLP. He advises many fashion and creative businesses on all aspects of their business