P>As the credit crunch keeps on biting, business secretary, Peter Mandelson, recently unveiled a £20bn package of measures designed to address the cash flow, credit and investment needs of small and medium businesses.
The measures include:
- a £10bn Working Capital Scheme;
- an Enterprise Finance Guarantee("EFG"); and
- a £75m Capital for Enterprise Fund.
The EFG aims to help smaller, credit-worthy companies which might otherwise fail to access the finance they need and is intended primarily to improve the availability of working capital through term loans and consolidation of overdrafts. It will also support lending which might not otherwise proceed due to lack of suitable security.
The £1.3bn scheme will support bank lending, of 3 months to 10 year maturity, to UK businesses with a turnover of up to £25m who are currently struggling to access finance they need. It will enable them to secure loans of between £1000 and £1m through the Government guarantee and is available up to March 2010.
The guarantee can be used in a number of ways:-
- to support new loans,
- refinance existing loans, or
- to convert part or all of an existing overdraft facility into a loan to release capacity to meet working capital requirements.
This last is conditional on the lender involved being prepared to continue to provide an overdraft and the ability of the business concerned to service both the term loan and the overdraft.
Loans for most business purposes in most sectors are eligible although some sectors are excluded including agriculture and the financing of individual export orders. Any SME wishing to participate in the scheme will need to provide all the information which a lender would normally require in connection with an application for finance. There is no automatic entitlement to receive a guaranteed loan. The decision as to whether or not it is appropriate to use the EFG in connection with a particular loan transaction has been fully delegated to the participating lenders who comprise:
- HSBC
- Barclays
- Clydesdale/Yorkshire Bank
- HBOS
- Lloyds TSB
- RBS/Natwest
Further information on the EFG, the Working Capital Scheme and the Capital for Enterprise Fund can be found on the BERR website at http://www.berr.gov.uk/
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
