Enterprise Finance Guarantee (EFG) is a government-backed scheme in the United Kingdom that aims to support small and medium-sized enterprises (SMEs) by providing them with access to finance. The scheme is designed to help businesses that may have difficulty in obtaining traditional bank loans due to a lack of collateral or a proven track record.
The EFG scheme was launched in 2009 as part of the UK government’s efforts to stimulate economic growth and encourage entrepreneurship. It is managed by the British Business Bank on behalf of the government and operates through a network of approved lenders.
How does Enterprise Finance Guarantee work?
Under the EFG scheme, the government provides a guarantee to the lender for 75% of the loan amount, reducing the risk for the lender and making it easier for them to lend to SMEs. This guarantee covers a wide range of business finance products, including term loans, overdrafts, invoice finance, and asset finance.
SMEs can apply for an EFG-backed loan through one of the approved lenders, which include major banks and specialist lenders. The lender assesses the business’s viability and creditworthiness, and if approved, the loan is provided with the government guarantee in place.
It is important to note that the government guarantee is provided to the lender, not directly to the business. Therefore, if the business fails to repay the loan, the lender can make a claim on the government guarantee to recover a portion of the outstanding debt.
Who is eligible for Enterprise Finance Guarantee?
The EFG scheme is available to SMEs that meet certain criteria. To be eligible, a business must:
- Be based in the United Kingdom
- Have an annual turnover of up to £41 million
- Operate in an eligible industry sector
- Have a viable business plan
- Be seeking finance for a suitable purpose
While the EFG scheme is open to businesses in various sectors, there are restrictions on certain industries such as agriculture, banking, and financial services.
What are the benefits of Enterprise Finance Guarantee?
The EFG scheme offers several benefits to SMEs, including:
- Improved access to finance: The government guarantee reduces the risk for lenders, making it easier for SMEs to secure funding.
- Flexible finance options: The EFG scheme covers a wide range of finance products, allowing businesses to choose the most suitable option for their needs.
- Support for growth and expansion: With access to finance, SMEs can invest in their operations, expand their workforce, and pursue new growth opportunities.
- Enhanced creditworthiness: Successfully repaying an EFG-backed loan can help improve a business’s credit profile, making it easier to access finance in the future.
Conclusion
Enterprise Finance Guarantee is a valuable scheme that provides SMEs in the UK with improved access to finance. By reducing the risk for lenders, the government-backed guarantee encourages lending to businesses that may have otherwise struggled to obtain funding. SMEs can leverage the EFG scheme to fuel growth, invest in their operations, and pursue their entrepreneurial ambitions. If you are an eligible SME looking for finance, exploring the options available through the EFG scheme could be a wise move.
