EFG driving small business growth ambitions

ICAEW Head of Enterprise Nick Levine answers your questions about the Enterprise Finance Guarantee scheme, a vital route to finance for growing businesses.

April 2019

The Enterprise Finance Guarantee (EFG), first introduced in 2009, is a government-backed scheme that helps SME businesses access debt finance. The scheme covers business growth funds from £1,000 to £1.2m.

To date it has helped facilitate over £3.2bn of debt finance to more than 30,000 businesses.

How is the scheme administered?

The scheme is administered to by the British Business Bank through 40 different accredited lenders. Collectively the delivery partners offer an array of different types of debt finance including term facilities, overdrafts, asset finance and invoice finance.

The complete list of lenders can be viewed on British Business Bank’s website.

What makes the EFG unique?

Unlike most types of lending to small businesses the scheme does not require companies to securitise their loans. This can often be a barrier to early stage companies accessing debt finance due to them not having sufficient assets to securitise and boost their credit worthiness.

The EFG overcomes this barrier by the government backing a 75% guarantee against facility balances, which greatly enhances the chances of companies being approved for loans.

What are the qualification criteria?

UK businesses with a turnover of less than £41m per year can apply. Additionally, their trade must be an eligible sector (most are eligible for support) and have a viable borrowing proposal to grow held back by holding insufficient security to meet a lender’s requirements.

How do business apply for funding?

In the first instance businesses should approach one of the EFG accredited lenders directly.

The application process takes the same time as a normal application, and if businesses are credit worthy enough to not require EFG support they will be offered finance on normal commercial terms.

Businesses that do not have sufficient security but which have a viable proposition are then granted funding with the lender, alongside EFG backing.

Companies which successfully receive funding through the scheme also have to pay a 2% levy to the government to support its cost.

Further information on the scheme, alongside other finance options can be found on ICAEW’s Business Finance Guide website.

Nick Levine is ICAEW Head of Enterprise.

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