Small Firms Loan Guarantee

One of the hardest parts of gaining business finance is having enough security to keep the lender happy. Even with your home on the line you may not have enough to secure funding for a large business project; and it is for cases like these that the Small Firms Loan Guarantee (SFLG) exists.

The SFLG means that the Department for Business, Enterprise and Regulatory Reform (BERR) guarantees 75% of the loan (for loans of up to £250,000 over up to 10 years), making it much less risky for the lender to agree to your business loan.

In return for the security you pay BERR a 2% premium on the remaining balance of the loan each year. The other terms of the loan are between you and the lender, so it is still worth contacting a number of lenders before deciding on who is best for your business.
 

Could You Be Eligible for SFLG?

To be eligible for the Small Firms Loan Guarantee your business needs to be under five years old and have a turnover of no more than £5.6million. The age is generally considered from when the business first came under the charge of corporation tax or first became liable to pay Class 2 National Insurance contributions.

If you have adequate security for the finance you are applying for, then it is less likely that you will be accepted for the SFLG.

Remember that using the SFLG costs you 2% of the loan balance each year, so you may find that taking a smaller loan that you have security for is cheaper than taking a bigger loan that needs SFLG backing.

Find out more about the Small Firms Loan Guarantee in our Grants for Small Businesses article.

A list of the lenders approved for the SFLG scheme is available from BERR here.