Entrepreneurs mull over SFLG measures in Budget

by Catherine Woods - Wednesday, 12th March 2008 - (2) comments

Alistair Darling’s promise to boost the Small Firms Loan Guarantee scheme by £60m has received a lukewarm response from entrepreneurs although there’s concern the structure of the initiative is still an impediment for businesses seeking funds.

In his first Budget, the Chancellor said the scheme, a joint venture between the Department for Business, Enterprise and Regulatory Reform (BERR) and a group of lenders, would be made available to more small- and medium-sized companies.

Currently only UK businesses that are less than five years old with an annual turnover of up to £5.6m can apply for a small firms loan. Seventy five per cent of the loan amount is guaranteed by the government.

Rhodri Ferrier, co-founder of natural men’s grooming brand Bulldog, says while it’s a positive announcement, “our practical experience is the scheme is difficult to access”.

He adds: “The scheme sounds very attractive when you hear about the idea of unsecured loans. But for us, it was much easier to raise money ourselves than jump through the hoops the banks had put in place.

“It just seemed to be slightly restrictive and cumbersome to access. We found we could go out and raise equity that was, in the end, more flexible than a loan.”

However, Loewy’s Charlie Hoult believes the extra cash will make some difference. “I think microfinance is a pretty central challenge to the UK economy," he says.

“It’s the smaller amounts of funding that are the most challenging to find but can make the most impact.”

Related article
Budget 2008: The impact on entrepreneurs
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2 Comments

March 13, 2008 9:51am
stuart rock Says:

Here's the relevant extract about the SFLG in the new Enterprise Strategy paper: The Small Firms Loan Guarantee (SFLG) is available to a wide range of businesses through high street lenders. Government is announcing changes to the operation of SFLG that will enable a wider range of businesses to continue to access debt finance for start-up and growth through high street lenders during any period of financial market disruption. The Government proposes to increase the banks SFLG lending allocations by 20 per cent for the next year. This will increase the amount of lending available by £60 million to a total of £360 million providing greater SFLG capacity at a time when financial market disruption may require the provision of debt finance to young and growing SMEs to be strengthened. In line with its renewed commitment to assist firms with growth ambitions, the Government will extend the eligibility of SFLG to businesses with growth ambitions that are more than five years old, including, but not limited to, those that have changed ownership. This will enhance the provision of debt finance for growing SMEs that lack loan collateral. In support of this change, the major SFLG lenders have committed to a renewed focus on promoting the appropriate use of SFLG to enable businesses who might otherwise not be able to access debt finance to fund their start-up and growth ambitions.

March 13, 2008 8:50am
Andrew Myall Says:

Having worked for the scheme for 17 years in reality what the DTI/ BERR web site states as to what banks actauly lend against is often quite different. Trouble is many applicants see the scheme as a last resort where the main areas for success of the scheme is for working capital, not for start up or early stage under six months.