Enterprise Finance Guarantee (EFG)

Banks will only provide loans as long as you can guarantee that bank loan through personal or business security, often called collateral. This not surprisingly limits those companies that can get a loan. In order to promote business the UK government has introduced the Enterprise Finance Guarantee (EFG).

This scheme used to be called the Small Firms Loan Guarantee scheme (SFLG), which concentrated more on smaller and newer businesses less than 5 years old. That restriction has now been lifted and the size of the businesses eligible has been increased to include medium sized companies.

If you use the EFG the interest rate is raised currently by 2%, but that may be worth paying if you can not secure a loan in any other way. You will need a good business plan and have to convince the bank that you have a excellent case, they don't have to loan funds to you. In fact they are told not to allow a EFG loan unless you can show that your business will be able to pay the loan back.

The EFG can also be used to guarantee overdrafts, to refinance existing loans and as an advance against invoices.

The government guarantees 75% of the loan, which is enough to allow banks more latitude in deciding to finance a business which may have little assets to secure the loan, but good prospects for growth. Remember though that it is still a loan - not a grant.

There are certain business areas that would not qualify, such as Finance, Insurance and Coal, there is a link to a full list below. The EFG is available to guarantee loans between £1000 and £1m and with terms of up to ten years for qualifying UK businesses with an annual turnover of up to £41m.

You will need to check eligibility, get your business plan together, then approach a participating bank. To help you we've put some useful links below that will explain more and offer guidance.

How to write a Business plan

EFG eligibility

Guidance on the Enterprise Finance Guarantee