If you run a business and think you may need some bank funding any time soon you need to get up to speed fast on a vital small business financial support scheme (the Small Firms Loan Guarantee Scheme) designed to inject cash into small businesses and remove the risks of lending for banks.
Gordon Brown and Alistair Darling are quietly seething that their plans to resuscitate small businesses from the downturn are being impeded by "fat cat" banking directors, local bank manager ignorance and conservative lending cultures – after reading this you’ll be mad too.
Could banks be conspiring against small businesses?
In this report we will:
The UK government wants to support the small business sector but has been struggling to encourage the banks to provide much-needed working capital.
In fact it has publicly requested that banks do all they can to get back to 2007 levels of lending to small businesses.
However here's what business owners like you have to contend with behind closed doors:
In spite of huge amounts of public money having been injected into several high street banks, lending to small businesses has reduced dramatically.
Instead of supporting the lifeblood of the economy, banks have been selfishly protecting their own cash reserves and balance sheets.
Our insider contacts have highlighted that some banks are intentionally delaying lending to businesses until the New Year in order to see which of their existing businesses will fail!
Currently the banks that are lending to businesses are cherry-picking the very best applicants while leaving the majority of good stable businesses to sweat it out.
Faced with this background of short-term conservative lending practices the government has identified an existing loan guarantee scheme, the Small Firms Loan Guarantee Scheme (SFLG) as the perfect route to increase lending to small businesses
So how does the scheme work?
The Small Firms Loan Guarantee Scheme is designed to support small to medium-size businesses in the UK that have viable businesses or business propositions but lack the security generally required by the UK banks to provide business debt finance.
This government scheme covers loan amounts from £5,000 to £250,000.
All loans are issued by the banks participating in the scheme and are underwritten by the Department for Business Enterprise and Regulatory Reform (BERR) previously The Department for Trade and Industry (DTI). The BERR will underwrite 75% of the loan provided it is issued subject to the participating banks normal lending criteria (except for the traditional conditions around security).
This government guarantee to the lender does come at a price. Each borrower needs to pay a 2% annual premium of the amount outstanding on top of the normal finance charges levied by the lender. Due to the unsecured nature of the debt, the lenders generally charge a higher rate, usually 1-2% above their typical commercial rates.
In order to qualify for the funding scheme, business applicants need to demonstrate:
To show he means business, the Chancellor Alistair Darling announced a further £60m injection into SFLG at the last budget (2008 to 2009)
However there has been an historical lack of understanding of the scheme at the vital local high street branch level.
There has been an obvious:
Would you believe, even before the Credit Crisis hit us, the pool of money, that had been set aside by the government for this scheme had only been 50% utilised. The other 50% was locked up tight in the bank vaults instead of in the hands of cash-hungry small businesses.
The banks claim this has been partly caused by a restrictive condition that had been in place for the last two years i.e. the scheme was only open to businesses that were less than five years old.
However, we know that this was only a small part of the problem and indeed this restriction was actually removed at the last budget.
Wouldn’t it be fascinating to have a peek at the current SFLG fund utilisation figures following the additional £60m injection?
Fortunately for our clients over the last five years we have been successfully promoting and negotiating SFLG fund raising so we know what can be achieved with knowledge, focus and contacts.
Of the clients that go through our full SFLG fund raising process at least 85% are successful.
Although senior banking officials have publicly endorsed government initiatives asking them to support small businesses via the Small Firms Loan Guarantee Scheme, they have not improved the internal promotion of the scheme or the knowledge levels of their local bank managers as to its application.
Interviewed in the Financial Times in September, Stephen Alambritis of the Federation of Small Businesses (FSB) said of SFLG, "It's a good little scheme - it’s helped 100,000 businesses. But the branch managers still don't like it....the banks make the right noises with ministers but the branches don’t advertise or recommend it."
This could explain why:
Even the managers that are aware of the scheme believe that the internal application process is just too complex to invest serious amounts of their time.
A separate spokesperson for the FSB said, "Everyone has been making the right sounds and been supportive of small businesses, but we need to see action on the ground."
Even the bank-savvy small business owners trying to take advantage of the SFLG scheme often feel they are trapped in a never ending fog of misinformation and information vacuum about the scheme:
Among the excuses given to some of our clients by their bank managers were:
"You need security in place to use this scheme"
"You need to have at least matched funding to even attempt an SFLG application"
"The scheme is only open to businesses that are less than 5 years old"
"You can’t use reinvested profits over the last few years of trading as your personal funding contribution"
But their bank managers were all wrong!
Even their accountants:
Were unaware of the SFLG underwriting requirements so were unable to help them progress with their application
Couldn't help because they were too busy completing year end accounts for other clients
Didn't have any influence at the local banks anymore because their contacts had long since moved on
Their accountants couldn't help!
Our clients’ finance brokers and business advisors claimed:
“The scheme is too complex”
“It isn’t necessary to prepare the professional finance and business plan documents”
“Factoring and Asset finance are all the working capital finance products that businesses really need”
Even their advisors were misinformed!
And of course business owners themselves:
Are limited in the time they have to complete the necessary plans
Don't have the contacts or time to be able to negotiate with a variety of banks
Don't know enough about the scheme and its rules to argue their case with their bank managers
Not surprisingly business owners didn't have the insider knowledge or resources!
We help our clients bypass the ‘funding log-jam’ often caused by the local bank manager in a variety of ways:
To ensure our clients maximise their SFLG funding potential and minimise their costs we:
Our previous clients do most of the bragging for us and we encourage you to question them directly before engaging our services:
“When I needed finance to purchase a Master Franchise in the UK, I approached the main banks and came up against the same barriers – I needed to find 50% deposit for unsecured business finance but I only had 40%.
“After considerable research I came across The Diverse Finance Company who specialise in the Small Firms Loan Guarantee Scheme. After our initial consultation they were confident they could raise the 60% funding I needed to finance my project. They didn’t disappoint! “They kept me informed at every stage of the application and finally got the full funding I required from one of the lenders I approached originally. Obviously the standing they have with the lenders and the expertise and knowledge they have of the Scheme enabled them to deliver greater finance than I could secure on my own. The Diverse Finance Company were professional and courteous at all times and helped me achieve a business objective that otherwise would not have happened.”
Andrew Wylie, Director – Wylie Coyote Ltd
“I’ve worked with the consultants at The Diverse Finance Company for over four years now. They have advised me on a number of projects including my main business, Leisure Net Solutions Ltd. They are very knowledgeable about the SFLG scheme and how to link it with other forms of commercial debt and equity finance. I use their consultancy services regularly because they understand business, are very well connected with the banking industry and have a real passion for making deals work. I can only sing their praises”.
Mike Hill, Director – Leisure Net Solutions Ltd
“My professional practice was at a stage where it desperately needed additional working capital to expand. We had run out of funds and had used all of our assets as security for secured commercial lending. I had read about the SFLG scheme and approached my bank manager. He was very dismissive of it and said it would not be appropriate for my situation.
“We found The Diverse Finance Company online and were initially sceptical about them being able to improve our situation. How wrong we were, they took the covers off our business, asking the kind of questions that were sometimes difficult to answer. They reconstructed our story and business plan and promptly introduced us to a new bank, arranged a meeting and negotiated the extra funding we needed.
“It did take several weeks but the process was rigorous and actually quite a bit of fun. The people at TDFC are highly professional, intelligent and approachable. I am very happy to endorse and recommend them.”
Paul Chapman – Professional Services Practice
We are proud of our 85% success rate in raising SFLG funds and that is reflected in our confidence of having a ‘no win - no fee’ component to our consultancy services
Act now to avoid the stampede and claim the funding that Gordon Brown wants you to have:
Although the scheme must surely gain wider support, much more stringent believability checks are being applied to this form of underwriting.
This is great news for our clients because the standard business plans we have been supplying over the last 5 years are regarded as the entry level standard for successful SFLG applications.
Don't forget the government is desperately trying to put money into the hands of the UK’s small business owners but some bankers stand accused of blocking this much needed flow of funds and the real crime is usually down to bank manager ignorance!!!!
Work with us to beat the fat cat bankers at their own game.
To help you raise your SFLG growth fund we’ll help you:
Act now to set up your business for growth:
Don’t forget you will only pay for the consultancy stages that are productive
We only get paid our success commission if we raise money for you ‘no money - no success fee’ so we're highly motivated and hungry to show your bank manager a thing or two
If you believe your business deserves the support that government wants to make available for the small business sector and you've had enough of ‘weasel words’ from your uninformed bank manager then:
Take our free SFLG eligibility test by contacting us:
Email us at info@diversefinance.co.uk with ‘SFLG Book’ in the email subject line and we’ll send you our free eBook so that you can research the topic at your leisure