For many “small” businesses in their early years of trading one of the main obstacles faced is securing funding, often because of a lack of security.

One potential solution lies with the “Small Firms Loan Guarantee Scheme (“SFLGS”). This scheme enables eligible small businesses to gain access to finance which a commercial lender would normally provide if there was an acceptable means of guaranteeing the loan.

So, what are the main features of the scheme and how does it work?

• The scheme is designed to be used by the approved lending practices as a means of facilitating loans where a business is unable to provide the necessary security.
• By providing the lender with a guarantee of 75% of the outstanding loan plus up to 6 months interest in the event of a default, banks and other financial institutions can consider business proposals which would fail the normal security criteria assessments.
• UK businesses up to 5 years old and with an annual turnover of up to £5.6 million are eligible for the scheme. However, certain business sectors are excluded such as transport, agriculture and coal and steel due to the governmental need to comply with European State Aid legislation.
• The loans available under the scheme range from £5,000 to £250,000 with repayment terms of 2 to 10 years.

The Department for Business Enterprise and Regulatory Reform has recently published its 2006/07 Annual Report into the SFLGS and some of the key features are:

• Around 50% of all SFLGS lending is to businesses up to 1 year old.
• Over 75% of all loans were for amounts up to £100,000.
• Over 2,700 businesses took up loans with a total lend value of over £211 million.
• The scheme has proved particularly popular in the production, retail and hotel and catering industries especially for franchise operations.

If you feel your business or planned business fits the criteria then the next step is to put together a business plan to support your funding application.

If you need help of assistance with your plan then contact Glen Marshall at Landin Wilcock & Co on 0114 2754321.