The DTi - Small Firms Loan Guarantee Scheme (SFLGS) STOP PRESS - 2008 budget sees end of the "five year rule" - older companies can now apply. Overview The SFLG Scheme enables leading high street banks and a range of other specialist lenders to lend to small businesses with viable business propositions that would not otherwise be able to borrow because they lack the security the lender requires. The SFLG covers 75 per cent of the lenders exposure, with the borrower paying two per cent premium to the Government. Loans are currently available for periods of between two and ten years on sums from £5,000 to £250,000. The SFLGS guarantees 75 per cent of the loan. In return for the guarantee, the borrower pays the DTI a premium of 2 per cent a year on the outstanding amount of the loan. The commercial aspects of the loan are matters between the borrower and the lender. New rules announced in October 2005 With sweeping changes to the Small Firms Loan Guarantee (SFLG) to be introduced later this year, businesses are being urged to examine the new eligibility criteria of the scheme. The changes come after the Government accepted in full the recommendations set out in the Graham Review of the SFLG, which benchmarked the UK scheme against several international loan guarantee programmes and set out 38 recommendations to ensure the continuing relevance of the SFLG. The new scheme will see a raft of changes that include: Expansion of lending limits so a single £250,000 limit applies to all eligible Small and Medium Enterprises (SMEs). Raising the turnover limit for all eligible SMEs to £5.6m Reserving resources to incentivise a range of new lenders to join the scheme Reserving resources to enable additional SFLG lending by banks that demonstrate a clear focus on high-growth SMEs Removing the limit on the level of borrowing that individuals can be associated with (the so called "connected persons" rule), thus centering the lending decision on the quality of the business case, not the previous borrowing history of individuals involved with the business. Along with implementation of these far reaching changes, the focus of the scheme will move to young businesses. This will see the availability of SFLG limited to those SMEs under five years old, as these are the businesses which have had least opportunity to build up a financial track record and assets against which to secure borrowing. The 'Five Year' period is defined by reference to the date of coming within the charge of Corporation Tax (for a company) or becoming liable to pay Class 2 National Insurance Contributions (for a self-employed individual). Application for SFLGS loans We are specialists in preparing businesses for and helping with applications to lenders in our network who actively seek involvement in the scheme. Contact or call us on 01784 439790 for a free assessments of your ability to qualify for a loan of up to £250,000 under this scheme. Even if you do not qualify for some reason, we may be able to suggest other routes to funding your business. That is what we are here for.

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