New finance schemes for small businesses: a guide
Since the Pre-Budget Report in November, a range of packages and promises on small business financing have been announced.
Arguably the most significant came in mid-January, when Business Secretary Lord Mandelson unveiled 'Real Help' for businesses.
However, the range of new titles - adding to and sometimes replacing pre-existing schemes - has caused some confusion. Here is MORE TH>N BUSINESS's guide to which scheme does what.
Enterprise Finance Guarantee scheme
Who does it target? Businesses with a turnover of up to £25 million
When is it available? Until March 2010
Perhaps of most immediate interest to smaller firms is the Enterprise Finance Guarantee scheme (EFG), which has replaced the Small Firms Loan Guarantee.
The £1 billion EFG is designed to help "viable" businesses - those who would be in good shape but for the credit crunch - who need help with working capital or investment.
It aims to support up to £1.3 billion of bank lending, and guarantees 75% of loans of between £1,000 and £1 million, repayable over a term of up to 10 years.
The Government anticipates that "most businesses in most sectors will be eligible", but those working in the agriculture, coal and steel industries are excluded under state aid rules.
Money lent under the guarantee can be used in a variety of ways, including as support for new loans, or for freeing-up cash flow. Existing loans can be refinanced, and existing overdrafts can be converted into a loan.
The full list of lenders is available on the BERR website.
However, decisions about the granting of EFGs are entirely down to the lenders themselves and are made on a commercial basis with no input from the Government. BERR warns there is no automatic entitlement to a guaranteed loan, or any pre-qualification process.
To find out if your business could be suitable for the EFG, visit 'Real help with finance now' at Business Link.
Working Capital Scheme
Who does it target? Firms with a turnover of up to £500 million
When is it available? From 1 March 2009
The Government's overall help package is built around the £10 billion Working Capital Scheme, which plans to guarantee 50% of the risk on £20 billion of short-term loans.
It is aimed at helping banks ensure that existing credit lines are kept open, while also freeing up capital that banks must use to create new loans.
The scheme comes into effect from March 1 2009, when the first £1 billion segment of Government commitment will be made available, giving rise to £2 billion of bank loans.
Capital for Enterprise Fund
Who does it target? Firms with a turnover of up to €50 million
When is it available? Ongoing
This £75 million fund harnesses £50 million of Government money along with £25 million from the banks, and is aimed at providing longer-term capital to SMEs that have "exhausted their traditional borrowing capacity".
It is open to viable UK-based SMEs deemed to be viable in the long term, allowing them to sell debt for a share in their business. The money is managed by professional fund managers who will invest in the company, providing capital that can be used to develop the business.
Businesses can access between £250,000 and £2 million, although firms working in agriculture and the coal sector are again prohibited from applying.
SMEs can register an interest in the fund by calling the Capital for Enterprise Fund Registration Helpline on 0845 459 9780.
Businesses can assess their ability for the various Government-guaranteed lending schemes on the Business Link website.
Other forms of help
The Export Credits Guarantee Department is there to help UK exporters of capital equipment and project-related goods and services, providing insurance against non-payment by overseas buyers.
It's there to help exporters operate with more confidence. Exporters who have not used the ECGD before can ask questions and request support from the new customer service team on 020 7512 7887, or email: Help@ecgd.gsi.gov.uk.
Supply2.gov.uk offers small firms access to lower-value Government contracts (under £100,000), allowing SMEs to see the range of public sector work that is out there. It offers a free service to pair up buyers with businesses, who can register at no cost.
The £25 million Regional Loan Transition Fund(available in England only) is offered through Regional Development Agencies to provide a last port of call for lending.
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