Small Business Advice

The EFG: a friendly giant for small businesses?

10 Dec 2015

Small businesses have accessed just over £2.5 billion of bank funding from the government-backed Enterprise Finance Guarantee (EFG), but recent data shows approvals and the value of loans are slowing down.

There were 7,415 loans offered in the first year of the scheme in 2009, but last year this fell to 3,029 and there have been just 1,667 in the first three quarters of 2015.

Loan sizes also fell, dropping to a low of £49.2 million in the last quarter from a high of £203.3 million in the third quarter of 2009.

So is it still worth going for the EFG and what are the risks?

What is the Enterprise Finance Guarantee?

The EFG was introduced in January 2009 in response to the credit crunch and complaints that small businesses were being denied access to finance. The guarantee provides an indemnity for banks, so they are more confident to provide finance to small businesses.

The government provides a guarantee of 75 percent of each individual loan in return for a 2 per cent annual premium paid by the lender.

The small business borrower is still liable for the full debt, but the idea is that banks should be more willing to lend if they have government backing.

What can the money be used for?

The EFG is not limited to loans - it can also be used for overdrafts and invoice finance.

Applications are open to small businesses operating in the UK with annual turnover of no more than £41 million. Successful applicants can access funds of between £1,000 and £1.2 million.

Most high street lenders and some specialists will provide finance under the scheme, but you should check which sectors are applicable with the government’s British Business Bank.

Finance has to be repaid between three months and 10 years for term lending and between three months and three years for overdrafts and invoice finance.

Keir Wright-Whyte


Managing Director

0207 043 4000

About the author

Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities.

Keir subsequently worked in a number of advisory roles with clients including in the energy trading, pharmaceuticals and financial services sectors.

He loves working at Accounts & Legal because of the variety of work and clients, the excellent team ethos and morale, the importance placed on genuinely helping and being useful for clients and because he believes what he does matters to clients and helps the firm.

Keir's primary role is to ensure that new clients with complex businesses or needs are on-boarded in the best way and he is a "trouble shooter" both for clients and where complex issues arise internally. He also helps the accounting teams strive to improve what we do for clients, whether processes or services.

When not debiting or crediting, Keir has a penchant for fixing old buildings, skiing, surfing and cycling.


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