Scheme Related Questions
- What is the Small Firms Loan Guarantee scheme?
- What is the current demand for SFLG?
- What is the SFLG policy on 'available security'?
- Why has there been a need for a reform of SFLG?
- What is the maximum SMEs can borrow under SFLG?
- What are the restrictions around the age of a business?
- Will the DTI still operate an SFLG enquiry line?
What is the Small Firms Loan Guarantee (SFLG) scheme?
A long-established mechanism operated in conjunction with all leading high street banks and a range of other lenders. The lending decision is commercial and is made by the lender. The SFLG will only come into play if the lender is prepared to lend except for lack of collateral to secure the borrowing. The SFLG covers 75% of the lenders exposure, with the borrower paying 2% premium to the Government.
What is the current demand for SFLG?
Currently there is around 7,000 SFLG loans per annum, with a significant increase post April 2003 following the inclusion of retail and catering businesses.
What is the SFLG policy on 'available security'?
It is the lender's decision whether personal assets are available for use against conventional lending. If the applicant is not prepared to allow all their available assets to be used to secure conventional lending, then SFLG should be ruled out. Please note that all lenders should apply their normal commercial policy to SFLG borrowing.
Why has there been a need for a reform of SFLG?
SFLG has suffered from perceptions of bureaucracy, non-strategic use and open-ended generation of liabilities. An independent review by Teresa Graham was announced in 2003, reported in October 2004 with the resulting recommendations being accepted by Ministers for implementation by the end of 2005.
What is the maximum SMEs can borrow under SFLG?
The maximum loan size is now £250,000 for all eligible SMEs.
What are the restrictions around the age of a business?
The 'new' SFLG is open to SMEs under five years old (intended to encompass the first three full years of trading) as they have had least opportunity to build up a financial track record and assets against which to secure borrowing.
Will the DTI still operate an SFLG enquiry line?
All enquiries should be directed to the lenders designated SFLG administrator. If they cannot resolve the issue they will have the ability to e-mail SBS direct.
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