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Small Firms Loan Guarantee scheme could be the answer for BMEs
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As a small to medium-sized enterprise, you may have viable business plans that need funding, and for which a loan would be appropriate. However, most BMEs are unable to obtain a conventional loan because they do not have assets to offer as security. But the Small Firms Loan Guarantee (SFLG) could help to overcome this by providing lenders with a government guarantee against default in certain circumstances.
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The SFLG is a joint venture between the Department of Trade and Industry (DTI) and a number of participating lenders. A list of SFLG participating lenders can be found on the Small Business Service (SBS) website, and those lenders administer the eligibility criteria and make all commercial decisions regarding borrowing. But unfortunately, you will still left to the mercy of some bigoted bank managers.
The main features and criteria of the scheme are:
A guarantee to the lender covering 75 per cent of the loan amount, for which the borrower pays a 2 per cent premium on the outstanding balance of the loan, payable to the DTI.
The ability to guarantee loans of up to £250,000 and with terms of up to ten years.
The scheme is available to qualifying UK businesses with an annual turnover of up to £5.6million and which are up to five years old. This is generally determined by the date the business came within the charge of corporation tax (for a company) or became liable to pay class 2 National Insurance contributions (for a self-employed individual). In the case of a business transfer the five year age limit applies to both the business making the acquisition and the business being acquired.
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