Real Help for Businesses

Last week the Government announced a £22bn package of support to help businesses across the UK through the current global credit crisis. The following is a summary of the information currently available on the three schemes:

Enterprise Finance Guarantee Scheme

This is a £1.3bn scheme available to firms with a turnover of up to £25m. The government is providing £1bn of guarantees to support £1.3bn of bank lending. The loans will be for between £1,000 to £1m with a maximum term of 10 years. This guarantee will apply to new loans, as well as the conversion of existing overdrafts in to loans.

Start date: 14 January 2009

Eligibility: Eligibility can be checked on the business link website

Current suppliers:

• Barclays
• Clydesdale/Yorkshire Bank
• HBOS
• HSBC
• Lloyds TSB
• RBS/Natwest

It is expected that a significant number of smaller lenders will also join the scheme in due course.

Working Capital Scheme

This scheme has been set up for businesses with turnover of up to £500m. The purpose is to provide an incentive for the banks not to reduce or withdraw working capital lines. The scheme will guarantee portfolios of bank loans rather than individual loans. The Government is providing the banks with guarantees covering 50% of the risk on existing and new working capital portfolios worth up to £20bn.

Start date: by 28 February 2009

End date: 31 March 2011

Eligibility:Businesses which have previously accessed short-term working capital loans from participating banks on the basis of their sound, creditworthy situation prior to the credit crunch are eligible. Current suppliers: Barclays, HSBC, Lloyds TSB and RBS are all currently in discussions with the Government.

Capital for Enterprise Fund

This is a scheme to help businesses raise new long term finance. The Fund will provide £75m of equity of which £50m will come from the Government and £25m from the high street banks. The Fund will invest in viable companies with high levels of existing debt. The scheme is targeted at businesses who have exhausted traditional sources of finance.

Eligibility:

• The business must be small or medium enterprise (SME)
• Annual turnover up to €50m and/or annual balance-sheet total not exceeding €43m, and less than 250 employees
• Must be a limited company
• Agricultural, coal sector and direct export related businesses are prohibited due to State Aid rules.

Start date: To be confirmed

End date: To be confirmed

Suppliers: Fund managers are currently being appointed.

If you would like to find out more or have any questions, we will be delighted to offer any help or advice. Please contact Chris Beaumont at Darlington, Gary Ellis at Durham or Terry Doyle at York.

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