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.

What is the Small Firms Loan Guarantee Scheme?

Small firms with viable business proposals which have tried and failed to obtain a conventional loan, either because of lack of security or business track record, or both, may be able to obtain finance under the Small Firms Loan Guarantee Scheme. By providing a government guarantee against default by borrowers, the Scheme enables high street banks and other financial bodies to lend between £5,000 and £250,000 to new and existing businesses. Between June 1981 and March 1999 over 66,000 loans have been guaranteed.

How the Small Firms Loan Guarantee Scheme works:

  • it is intended to be in addition to normal commercial finance. It is not available if a conventional loan can be obtained;
  • once a lender has decided that an applicant has a viable business proposal and is acceptable for a loan under the Scheme, the lender applies to the Department of Business, Innovation and Skills (BIS) for a guarantee;
  • BIS issues the lender with a guarantee;
  • in return for government support, a premium is payable by the borrower to BIS;
  • if the loan is for £30,000 or under, certain banks and other lenders can grant the application themselves without first referring it to BIS’s Small Firms Loan Guarantee Unit (the Small Loans Arrangement);

The Scheme is a joint venture between BIS and the lenders. All commercial decisions affecting borrowers are taken by the lenders. The Department cannot intervene.

© 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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