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The Small Firms Loan Guarantee scheme provides loan finance to those businesses that are trading or about to commence trading which we would otherwise be unable to help because of a lack of available security. It is offered in association with the Department or Trade and Industry (DTI). Loans can be used to finance a wide variety of needs from working capital to the acquisition of fixed assets such as plant or machinery, or to fund research and development.
Start-ups and existing businesses trading for less than two years will be considered for loans of up to £100,000. If yours is an established business (over two years old), we will consider applications for amounts up to £250,000. For incorporated businesses the minimum loan size is £5,000. For unincorporated businesses the minimum loan size is £25,001. Loans can be taken out for periods between 2 and 10 years capital repayment holiday options are available. Interest rates can be fixed or variable. Fixed rate are available for any full year period.
Equal repayments are fixed and agreed at the outset and are made by standing order from a current account, to which interest is debited quarterly. If you borrow less than £30,000 repayments are required monthly, while loans over this amount can be repaid monthly or quarterly.
Is it for me?
You can apply for a Small Firms Loan Guarantee scheme loan if yours is a small, independent and creditworthy business that:
- passes our normal policy requirements and
- meets the scheme's criteria and
- needs the money to buy or help to buy a trading asset (which can include 'goodwill'), for working capital or for research and development purposes.
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| Small Firms Loan Guarantee scheme @ a glance |
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Key Benefits
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The DTI provide the Bank with a guarantee should your business not be able to meet its obligations or repay the debt by selling-off assets.
Fixed or variable interest rate options available.
Capital repayment holiday options available.
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Eligibility
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Any business that meets both our policy requirements and the scheme criteria.
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Security
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Direct Security required (business assets).
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Min/Max Amount
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£5,000 - £250,000 (£25,001 minimum for unincorporated borrowers).
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Min/Max Period
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2 - 10 years
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Charges and Fees
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Fixed or variable interest rate options available and agreed at the outset.
An arrangement fee of 1% will apply to all new loans. A guarantee premium fee of 2% of the reducing balance per year is payable to the DTI.
For fixed rate loans, if the loan is repaid early, an early repayment fee is payable.
The variable interest rate charged moves in line with changes in the base rate. Repayments are reviewed annually.
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Before you apply for this type of loan you should consider the following carefully
- The Small Firms Loan Guarantee scheme applies to small businesses only. Within the terms of the scheme, a 'small' business is classified as having fewer than 200 employees, with a sales turnover of less than £3 million a year, at the time of the application (or less than £5 million a year for manufacturing businesses).
- Scheme loans are not available for refinancing, debt consolidation or for increasing share ownership.
- Any available security must be offered before the Small Firms Loan Guarantee scheme loan is an option. If you have the available security but are unwilling to use it, then you will not qualify for the Small Firms Loan Guarantee scheme. The scheme requires that directors/principals etc. must pledge all of their own available assets to the Bank before we can consider funding. A debenture will be required from limited company borrowers.
What about the costs?
Variable rate interest is calculated as a percentage over Bank Base Rate. The interest charged varies in line with changes in the base rate. Repayments are reviewed annually. The interest rate will be agreed with you at the outset. A fixed interest rate option is available.
An arrangement fee of 1% will apply to all new loans except customers switching their SFLG loan from another lender.
Additionally, a 2% guarantee premium is payable to the Department of Trade and Industry (DTI). This is calculated as a percentage of the reducing balance of the loan. For loans above £30K, it is collected quarterly by direct debit. For loans of £30K and under, it is collected as a one-off, up front fee.
For fixed rate loans, if the loan is repaid early, an early repayment fee is payable.
Next Steps
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