The Small Firms Loan Guarantee scheme - SFLG - has been in existence to enable small businesses with a viable business plan, but lacking security, to borrow money from approved lenders. The Small Firms Loan Guarantee scheme (SFLG) is a joint venture between the DTI and the approved lenders.
The scheme will provide loans between £5000 and £250,000. The DTI do not lend the money as they leave the commercial decision to the bankers.
The borrowers are not asked to provide personal guarantees although any personal security will be requested by the bank prior to a SFLGS application being considered. The DTI will provide 75% of the security to the bank on acceptance by them of the application. Certain businesses are not available for the loan and companies with more than 200 employees are not eligible. Turnover in the prior year to the application must be below £5m for manufacturing industries and £3m for all other businesses. In addition a premium on the amount outstanding is charged by the bank.
NOTE: Changes to the Small Firms Loan Guarantee scheme (SFLG) came into effect from 1 April 2003 meaning that more businesses may be eligible. The changes include:
• A single guarantee rate of 75% for all new loans; • Sector exclusions removed for retailing, catering, coal, hairdressing and beauty parlours, • The maximum turnover level for non-manufacturing businesses increased from £1.5m to 3m; • The premium paid by the borrower set at 2% per year on the outstanding balance for all new loans.
Changes may continue to be introduced by Government, and Strategy Consulting Ltd are happy to advise on the current situation.
The importance of a carefully prepared business plan is often under-estimated. The borrower must convince the potential lender that he or she has a viable business proposal. There is a need for a specialist funding plan to be created identifying closely the compliance with the requirements of the scheme and the banks and our consultants have wide experience in meeting these needs. A potential lender would expect to see information on:
• Management: key personnel, their experience, knowledge of the industry, age, education and training; • Product or service: details of product or service on offer, state of product development, any follow-up products or services; • Markets: description of the market and its size, customers, competitors, sales estimates and expected market penetration. Sales forecasts should be supported by hard evidence and research wherever possible. Also an explanation of how the business will succeed in the market against competition; • The business: when started, results to date, borrowing history, existing commitments, current bankers; • Objectives and Strategy: business objectives, timetable and assumptions, risk factors, longer term plans; • Financial Projection: projections of at least one year’s future performance together with supporting assumptions and evidence (order books, customer enquiries). Projections should include profit and loss account, monthly cash flow projections, balance sheets and capital expenditure budget; • Finance Required: total funding required based on projections, application of those funds, repayment assumptions. Purpose of finance, detailing capital expenditure; • Security Available: what assets are available as security (personal assets as well as business assets). Also what assets have been used as security elsewhere; • Management Information Systems: accounting systems used by the business, ability to produce regular management accounts; • Principal Risks: most likely areas of risk and ability to cope with these. What happens in event of sickness or injury to key personnel?
John Courtney, Chairman Strategy Consulting Limited target="_blank" title="www.strategyconsultinglimited.co.uk">www.strategyconsultinglimited.co.uk
>john@strategyconsultinglimited.co.uk
Marketing: SEARCH ENGINE OPTIMISATION - MARKETING - NEW PRODUCTS Funding: BUSINESS ANGELS - SMALL FIRMS LOAN GUARANTEES - GRANTS Strategy: STRATEGY - BUSINESS PLANNING - WORKSHOPS small firms loan guarantee scheme, SFLG, small businesses, business plan, borrow money, DTI, approved lenders
UK Small Firms Loan Guarantee Scheme SFLG new rules apply up to 250000 available - To learn more about this author, visit John Courtney's Website.
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John Courtney
(Visit John's Website)
Strategy Consulting Limited is a small,
specialist Management Consultancy for
SME's in the UK assisting with business
strategy, funding, business planning,
marketing and internet.
Clients range from start-ups, though to
small family firms with a turnover in
excess of £1 million and up to
International companies turning over £100
million plus.
The Chairman of Strategy Consulting
Limited, John Courtney has been a Company
Director for over 20 years, including many
years as Chairman or Managing Director in
his own businesses which have ranged from
sporting goods to agricultural chemicals.
He has been a Non Executive Director for
several SME's.
John has trained at The Academy of
Business Strategy, and is an associate of
the Institute of Management Consultancy,
and a member of the Institute of
Directors. He is also a visiting lecturer
on the MBA course at Cranfield University
School of Management. John has run
training seminars at board level on
corporate strategy and made presentations
to both large and small groups on funding
strategies.
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