The Enterprise Finance Guarantee

[graham pugh]

Hi All,

Like many SME's right now cash flow is my issue. I am LTD and can show that I am a viable business (in that I have accounts showing profit) but I have no finance facilities. No overdraft or business loans. I do however have suppliers banging on my door threatening to wind me up becsuse I am struggling to pay through summer because I am a seasonal business (Ski/Snowboard/outdoor retailer) and this summer due to the current general financial climate means my turnover is just covering my general overheads.

I have a 3 year business plan for expansion and have almost doubled my turnover in 3 years. I have tried my bank (Natwest) and politley been told that they will not lend to me under any circumstances, ostensibly because I have had a few bank charges in the last 6 months!! The same with HBOS, they wouldn't even give me an account! Strikes me as an excuse at the least.

It seems I am being penalised because I have run my business for the last 4 years (since buying it) without finance. I have looked into the Enterprise Finance Guarantee (EFG) but most people I discuss this with say it is for re securing existing finance where security is problematic. I don't have any security other than the stock I hold and fixtures and fittings.

In short I need finance to secure my short term future, I think the EFG would be suitbale for my needs and that I qualify in that I am viable, solvent and able to pay.

Can anyone say who is most likely to lend under the EFG?

Thanks, Graham

[accountantpete]

The EFG is available to new financing arrangements - not just resecuring existing financing - and is targeted at businesses without available security- ie yourself.

I'd go back to the Natwest and ask to see someone about the scheme.

[James Smith]

Graham,

if your bank are not playing ball then you will struggle. Whilst Pete is correct in theory the answers I am getting on the ground are that this is being used just for re-financing to reduce the banks risk and not much at all is available for new lending. The banks still hold 25% of the risk, and if they think you are a bad risk its going to be an uphill struggle.

The time these loans take to come through is also an issue - periods are being measured in months not weeks.

Really your only option with your bank is to try and talk to someone else at your bank - often different bankers in different branches will hold different views. Your accountant may know the local manager if its all local but this doest really help much these days, but might be worth a question - to get a definite "no chance" if nothing else.

TBQH I don't fancy your chances - its probably a lot easier to finance personally and then lend that money to the company than chase after a company loan. Do of course remember that you will be personally liable for any company debt so there is no real risk of doing this vs a business loan.

Hope that helps a little

Regards,

[accountantpete]

I'm slightly more optimistic than James - the banks would be mad not to have offloaded their more dodgy borrowings onto the scheme but it is a limited pot and they may feel reluctant to lend unless you show determination or kick up a fuss.

I'd re-approach and tell them that you are precisely the type of business that the scheme is aimed at, and get an explanation if you are still refused.

If it was my livelihood on the line and I felt confident in my case I would then contact my MP.

[graham pugh]

I've spoken to my Natwest business manager and arranged a meeting next week to put my case forward supported with a 3 year business plan and my accounts so we will see what happens. I know the managers do not have any power to overrule the lending section of the bank in question but the first port of call is to get the manager on side.

Accounantpete : Had already thought of the MP route so went to see her - Ruth Kelly - yesterday at her surgery and put my case forward and she is going to write a letter to the area business manager for Natwest to ask him to explain why the EFG is not being entertained in my case. Whether it will do any good is debatable but some pressure is better than none!

We will see what happens!?!
Graham

[dan74uk]

graham

can you let me know how you get on .i have done the same with my mp hilary benn..

[graham pugh]

Hi, Went to see my mp Ruth Kelly and she confirmed that the EFG is not particularly for refinancing and could be applied in my case, which I already knew. Natwest are still saying that they will not lend to me under the EFG scheme because they are using it for refinance and because I have had a couple of returned cheques this year (meaning an unauthourised overdraft).

They weren't even interested in my business plan, accounts or cash flow/prifit and loss forecasts. This strikes me as a catch all excuse. The MP said she would write to the area business manager and ask them to justifiy why they aren't lending in the 'spirirt' of the scheme. We will see what diference that makes, if any.

In the mean time I have had a conversation with Lloyds TSB who say they are quite happy to look at my application and supporting documentation and that they are lending under the EFG to businesses who don't need to refinance existing facilities but need cash flow to stimulate some growth. I am meeting with them this week to discuss this but I think that may be last chance saloon for me with the major banks.

Thanks Graham

[accountantpete]

Sounds like Natwest didn't give you much of a hearing.

Good luck with Lloyds.

[Global Assistant]

Hi Graham

I hope things go OK with Lloyds TSB - dig your heels in and go for it. We had a similar situation a few months ago and we were with Lloyds TSB. Unfortunately we got no where with them who we had been with for over 12 years or anyone other bank for that matter.

Sadly they are not playing ball, the banks have cocked so much up for us all but just do not want to help you through it.

We ended up closing our kitchen showroom down as we just could not carry on without the banks backing. Still we now sell kitchens from home and it is working well. No more big headaches of rent, wages etc to worry about so at least our cloud had a silver lining. Hope yours does too.

GOOD LUCK

[dan74uk]

dont give in graham.the bank brought down my company withdrawign a million plus facility in the busiest week of my year where i do 70 per cent of my business.its down to the goverment to take these decisions out of the hands of banks.proescute the bankers that make these decisions that cost lives..dont give in im taking this as far as it will go .the scheme is not meant for making toxic debt more secure which is what the banks are using it for .