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EFG (Enterprise Finance Guarantee Loan)
Description

The Enterprise Finance Guarantee is a guarantee facility for small businesses intended primarily to improve the availability of working capital through term loans and the consolidation of overdrafts. It will also support lending for business growth and development in cases where a sound proposition may otherwise be declined due to a lack of security.

In the Pre-Budget Report of 9 December 2009, the Chancellor announced an extension of Enterprise Finance Guarantee until 31 March 2011.

The guarantee will cover the following types of lending:
·         new term loans (with terms of between three and ten years)
·         refinancing the existing term loans, where the loan is at risk due to deteriorating value of security or where for cashflow reasons the borrower is struggling to meet existing loan repayments
·         conversion of an existing overdraft into a term loan to meet working capital requirements
·         guarantee on invoice finance facilities to support an agreed additional advance on a SME's debtor book. This will supplement the invoice finance facility already in place
·         guarantee on new or increased overdraft borrowing for the SMEs experiencing short term cashflow difficulties

The guarantee will fund:
·         working capital
·         investment by businesses seeking to grow or develop

In addition to regular capital and interest payments to your lender, and any arrangement fee which they may charge, a premium is payable to the Department for Business, Innovation and Skills (BIS).

The premium is equivalent to two per cent per annum on the outstanding balance of the loan, assessed and collected quarterly in advance throughout the life of the loan.

Delivery of the Enterprise Finance Guarantee, including the decision on whether or not it is appropriate to use it in connection with any specific lending transaction, is fully delegated to the participating lenders. There is no automatic entitlement to receive a guaranteed loan and nor is there any pre-qualification process for it.