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The sweeping changes to the Small Firms Loan Guarantee (SFLG) recommended by the Graham Review, as announced by the Government in October, have come into effect.
The changes were made after the Government accepted in full the recommendations set out in the Graham Review of the SFLG, which benchmarked the UK scheme against several international loan guarantee programmes and set out 38 recommendations to ensure the continuing relevance of the SFLG.
The main changes introduced are:
• Expansion of lending limits so a single £250,000 limit applies to all eligible SMEs;
• Raising the turnover limit for all eligible SMEs to £5.6m;
• Removing the limit on the level of borrowing that individuals can be associated with (the so called “connected persons” rule), thus centreing the lending decision on the quality of the business case, not the previous borrowing history of individuals involved with the business.
• Reserving resources to incentivise a range of new lenders to join the scheme;
• Reserving resources to enable additional SFLG lending by banks that demonstrate a clear focus on high-growth SMEs.
Along with implementation of these changes, the emphasis of the scheme has moved to assisting start-ups and young businesses. The availability of SFLG is limited to those SMEs under five years old, as these are the businesses which have had least opportunity to build up a financial track record and assets against which to secure borrowing.
Further information on the SFLG and for a listing of approved lenders, visit: www.dti.gov.uk/sflg/
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