What Government funds are available to SMEs to help growth?

There are a number of funding options that are sponsored by the Government through the Department for Business, Innovation and Skills (BIS).

Enterprise Finance Guarantee Scheme (EFG): The EFGS replaced the successful SFLG Scheme, it is a loan scheme that has been designed for SME’s that meet the criteria, to obtain loans even if they do not have any security to back the loan. The lender is provided with a 75% from the government. 45 approved lenders have signed up to the EFG programme. Be aware, however, that all lending decisions are made by the provider and not the government and many lenders are still asking for personal guarantees from the borrowers even though they have a 75% guarantee from the government. Loans are available from £1,000 to £1,000,000 for SMEs with turnover of less than £45m. It is important to understand that these are not the most popular type of loans with the banks, due to their risky nature.

Export Enterprise Finance Guarantee Scheme (EXEFG): This is like the EFG Scheme but this time it is for exporters who meet the criteria who also lack the security that they would normally need. In this instance the Government provides the provider with a 60% guarantee. Only a few Banks have so far signed up for this scheme. These include HSBC, Barclays, Santander, RBS and Lloyds. These are for short term export loans of between £25,000 and £1,000,000. The SME’s must not have turnover over £25m. At present this scheme is closed to new applicants but it is hoped that it will be re-launched in a simpler form.

Business Angel Co-Investment Fund: This was created from a Regional Growth Fund and it can make investments of between £100,000 to £1m into high growth, early stage SMEs. They particularly like those areas that were hit hard by spending cuts. Their investments sit alongside other investments that have been made by business angels. There are some geographical restrictions and the sum investment must not be more than 49% of the total required.

Enterprise Capital Funds (ECFs):  The ECF Scheme seeks to bridge the equity gap between private investors and what the struggling innovative SME’s actually require to reach their growth potential.

Business Finance Partnership (BFP): The BFP aims to ease the flow of credit to businesses in the UK by helping to diversify the sources of finance available to them. It is part of a £21 billion programme of credit easing measures announced in the Autumn Statement 2011 to support smaller and mid-sized businesses that do not have ready access to capital markets. The Government has already committed to spend £700 million through managed funds that lend directly to mid-sized businesses in the UK.

The BFP will initially invest a sum of £1billion in loans alongside private co-investors. Actual terms have not yet been published but it is believed that SMEs with turnover of less than £500m will be able to apply. This scheme will enable SMEs to access funding through non bank lending channels.

The small business tranche of the BFP will focus on co-investing through non-traditional channels, such as peer-to-peer platforms, supply chain finance and mezzanine finance for businesses with a turnover below £75 million.

Provided turnover is below an average of £75 million over three years, the end recipients of the scheme can be any sort of UK small businesses (partnerships, private companies, employee owned) operating anywhere in the UK and in any sector. BIS will invest up to a maximum of 50 per cent in any fund or channel, on fully commercial terms

For further information go to the Department for Business, Innovation and Skills’ website : http://www.bis.gov.uk/