Small Firm Loan Guarantee Scheme (SFLG)
Will a Small Business Loan help your business grow?
The Small Firms Loan Guarantee scheme - SFLG - This scheme enables small businesses that have a practical business plan to borrow money from approved lenders, even though they lack security. The Small Firms Loan Guarantee scheme (SFLG) is a joint venture between the DTI (Department of Trade and Industry) and the approved lenders.
Recent amendments to the scheme mean that loans from £5,000 to £250,000 can now be obtained for companies that having been trading for less than 5 years. The DTI do not loan the money, this decision is left to the bankers.
Applicants will not be asked to provide personal guarantees for the loan although any personal security will be requested by the bank prior to a SFLGS application being considered. The DTI will provide 75% of the security to the bank on the loan being accepted.
Be aware that not all businesses are eligible for the loan; companies will not be considered for the scheme if they have:
- More than 200 employees.
- Turnover in the year prior to the application must be below £5.6m for all businesses.
Changes to the Small Firms Loan Guarantee scheme (SFLG) came into effect from 1 April 2003 meaning that more businesses are now eligible for the scheme these include:
- The following sectors have now been included: Retail, Catering, Coal, Hairdressing and Beauty parlours
- The maximum turnover level for non-manufacturing businesses has increased from £1.5m to 3m;
- The premium paid by the borrower set at 2% per annum on the outstanding balance for all new loans.
There may be other changes introduced by Government, however Business Services UK will keep all applicants up to date on the current situation.
It is important that all applicants carefully prepare a business plan the team at Business Services UK are happy to assist you in this matter. The bankers will need to be convinced that your business is suitable for the scheme. If you require assistance drafting a specialist funding or business plan our team of consultants have a wide experience in meeting these needs. A potential lender would expect to see information on:
- Management: key personnel, experience, knowledge of business and sector, age, education and training;
- Product or service: details of product or service your business offers, products or services in development.
- Markets: description of the market and its size, clients, competitors, sales estimates and expected market penetration. Sales forecasts should be supported by hard evidence and research if possible.
- The Business: When did it start trading, results to date, business borrowing history, existing commitments, current bankers;
- Objectives and Strategy: Business objectives, timetable and assumptions, risk factors, longer term plans for the business;
- Financial Projection: Projections of at least one year's future performance with supporting assumptions and evidence (order books, customer enquiries). Projections should also include profit and loss accounts, monthly cash flow projections, balance sheets and capital expenditure budget;
- Finance Required: The amount of funding required, based on projections, application of those funds, repayment assumptions. Purpose of finance, detailing capital expenditure;
- Security: What assets are available as security (personal assets as well as business assets). Also what assets have been used as security for other loans;
- Management Information Systems: What accounting systems are used by the business, what is your ability to produce regular management accounts?
- Risk: What are the most likely areas of risk and what is your ability to cope with it. What procedures are in place in event of sickness or injury to any of your key personnel?
If you would like more information on the SFLG Scheme, simply click the Contact Us button below.
