Q. Does the Department of Business Innovation and Skills (BIS) have programs that help entrepreneurs? What are they?
A.BIS has several programs that can give extra funding to entrepreneurs. Chief among them are the Enterprise Finance Guarantee (EFG) and the Enterprise Capital Funds (ECF). EFGs are bank loans intended for small and medium sized enterprises (SME) that lack enough collateral to secure a normal commercial loan. Meanwhile, ECFs supplement equity financing for SMEs. It uses government funding and private sector investment to close the equity gap.
Q. What do these programs entail and am I eligible for them?
A.Although Enterprise Finance Guarantees are available to businesses in most sectors, the program is a targeted measure and is not designed for the majority of businesses. The program supports lending to businesses with an annual turnover of up to £25m seeking loans from £1,000 to £1m and with terms of up to ten years. The loan provides lenders with a government-backed guarantee for 75 per cent of the loan value. In return for the guarantee, the government charges the borrower a premium of two per cent every year on the outstanding balances of the loan and is evaluated and collected quarterly throughout the life of the loan. The program is available to businesses throughout the UK from approved lenders. The list of lenders includes big banks such as Barclays, HSBC, Lloyds TSB, and the Royal Bank of Scotland.
Enterprise Capital Funds invest a mix of private and public money in small, high-growth businesses seeking capital. The government will finance up to two-thirds of the money in an ECF while the rest is to be funded by private investors. There is no maximum fund size for an ECF, but the government will commit no more than £25m. However, ECFs are fixed life-funds, extendable only with the consent of the government and other investors. They are not evergreen funds that repeatedly support investment returns. Ownership of ECFs is not tradable on public markets. Capital for Enterprise Limited (CfEL) manages ECFs.
Q. How do I apply to these programs?
A.EFG applicants need to provide all the information normally required by a lender for a loan application including business plans, details on the purpose of the loan, details on the other borrowings of the business, management accounts, financial projections, and details on any other publicly-funded support received by your business within the past three years. Participating lenders make the decision whether or not to give the loan after assessing your business’s proposition and eligibility. From 1 August 2010, lenders taking part in the EFG program will have 20 days from receipt of your application to reach a lending decision. Those who want to apply for ECFs should contact CfEL on its website www.capitalforenterprise.gov.uk or e-mail firstname.lastname@example.org prior to submitting a bid.