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Enterprise Finance Guarantee (EFG) Scheme

The Enterprise Finance Guarantee (EFG) scheme is one of the UK government’s flagship business loans measures, designed to support lending to firms that would otherwise be turned down for finance because of insufficient security.

How does it work?

Enterprise Finance Guarantee loans get their name because the government guarantees to take on most of any losses that occur because of bad debt. This means that the lender is only exposed to part of the risk, and in theory will offer loans that they wouldn’t otherwise have agreed.

Of course, the lender will still have a due diligence process and won’t give loans out to anyone who asks — but what EFG loans aim to do is widen the criteria somewhat to help more businesses get finance.

Under the scheme, the lending decision rests solely with the finance provider, and the borrower pays interest and fees to the lender as normal, as well as paying a quarterly fee to the Government. This means that although EFG loans can be more expensive than other business loans, they might make the difference between getting the finance and not.

Types of funding available

Who is involved?

Although it’s a government loans scheme, Enterprise Finance Guarantee loans are delivered through commercial partners — originally major high street banks, but more recently lenders who have more risk appetite.

The list of lenders offering EFG loans is growing, and now includes more challenger banks and independent lenders who can help a wider range of business situations.

Funding Options works with over 70 of the UK’s best business lenders, so we can help you find a lender if you’re considering business finance.

Eligibility criteria

Eligibility criteria for Enterprise Finance Guarantee loans are determined by the individual lenders, alongside their normal commercial lending appetite and practices.

However, the British Business Bank issued the following eligibility guidelines:

  • Operating in the UK
  • Turnover less than £41 million
  • Seeking finance between £1,000 and £1.2 million
  • Loan repayment period between 3 months and 10 years
  • Overdraft, invoice finance and revolving credit facility repayments between 3 months and 3 years
  • Finance required for eligible business purpose
  • Your business operates in an eligible sector

Main principles of Enterprise Finance Guarantee Loans

The British Business Bank requires the following principles are met for Enterprise Finance Guarantee loans:

  • The applicant’s plans are viable
  • The applicant’s plans would meet the usual commercial requirements for a loan
  • The lender would wish to lend to the applicant were it not for the lack of security
  • EFG loans can be used for refinancing

The EFG scheme is designed for applicants that have proven businesses but not enough security to get a loan. Enterprise Finance guarantee loans are not intended as funding for start-ups or for speculative/unproven business ideas, and lenders want EFG applications that would have met their standard criteria for loans apart from the lack of security required.

EFG loans can be used to refinance existing overdraft borrowing, but not at the expense of terminating the facility completely — it's important that some kind of working capital finance facility remain in place if the business requires it.

Other government business loans schemes

Start Up Loans

The government also offers Start Up Loans, which supports startups with finance and mentoring. Through the Start Up Loans scheme, businesses can get loans up to £25,000 to launch new businesses or invest in growing existing businesses that have been trading for less than 24 months.

Funding for lending

Similar to the EFG scheme, Funding For Lending is another government initiative designed to incentivise banks and building societies to boost their lending to the UK economy. It does this by providing funding to banks and building societies, who can then use these funds for their own lending — and the price and quantity of funding provided is linked to their lending performance.

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