Small Firms Loan Guarantee Scheme

The Small Firms Loan Guarantee Scheme has been suspended. The type of lending previously provided under SFLG – to businesses that lack collateral and/or track record – will still be available under the new Enterprise Finance Guarantee Scheme.

The Business Plan

The importance of a carefully prepared business plan is often under-estimated. The borrower must convince the potential lender that he or she has a viable business proposal. This cannot be done without a business plan. A local Business Link, (Business Connect in Wales or Business Shop in Scotland), Training and Enterprise Council, Local Enterprise Company, Enterprise Agency or qualified accountant may be able to help draw one up. Many lenders also have their own publications containing advice on how to plan and monitor a business, as well as specialised small firms advisory offices.

In addition to having a business plan, the borrower must also convince the lender of a personal commitment to the business. Personal commitment (or lack of it) plays a crucial role in influencing the lender, and it is not always measured in terms of finance. Each case is judged on individual merit.

A potential lender would expect to see information on:

Management: key personnel, their experience, knowledge of the industry, age, education and training;

Product or service: details of product or service on offer, state of product development, any follow-up products or services;

Markets: description of the market and its size, customers, competitors, sales estimates and expected market penetration. Sales forecasts should be supported by hard evidence and research wherever possible. Also an explanation of how the business will succeed in the market against competition;

The business: when started, results to date, borrowing history, existing commitments, current bankers;

Objectives and Strategy: business objectives, timetable and assumptions, risk factors, longer term plans;

Financial Projection: projections of at least one year’s future performance together with supporting assumptions and evidence (order books, customer enquiries). Projections should include profit and loss account, monthly cash flow projections, balance sheets and capital expenditure budget;

Finance Required: total funding required based on projections, application of those funds, repayment assumptions. Purpose of finance, detailing capital expenditure;

Security Available: what assets are available as security (personal assets as well as business assets). Also what assets have been used as security elsewhere;

Management Information Systems: accounting systems used by the business, ability to produce regular management accounts;

Principal Risks: most likely areas of risk and ability to cope with these. What happens in event of sickness or injury to key personnel.

© The Small Firms Loan Guarantee Scheme guide has been reproduced from information published by the Department of Business, Innovation and Skills (BIS) and in accordance with Crown Copyright.
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