Government funding

Government funding can be broadly split into two types - Loan Guarantees and Grants and "Soft" Loans.

Government Loan Guarantees

Currently there are three main operational schemes offering Government Guarantees for part of the loan supplied by a Commercial Bank to businesses in the UK. They are Enterprise Finance Guarantee Scheme (which replaces the Small Firms Loan Guarantee Scheme), Capital for Enterprise Fund and Working Capital Scheme. All three were introduced on 14th January 2009 to assist British businesses weather the economic downturn and the credit crunch.

Enterprise Finance Guarantee Scheme

When launched in January 2009 £1bn of Government funds was intended to support up to £1.3bn of new bank lending up to 31st March 2010. The June 2010 Emergency Budget increased the government funding by a further £200 million and extended the scheme until 31st March 2011.The scheme is open to businesses with a turnover of up to £25 million and is designed to enable businesses to secure bank loans of between £1,000 and £1 million repayable over 10 years. The Government guarantees 75% of the loan, with the banks covering the remaining 25% on an unsecured basis (although the banks may, at their discretion request personal guarantees to cover the 25%) Most businesses in most sectors will be eligible for the scheme with the exception of businesses in the agriculture, coal and steel sectors which are specifically excluded by State Aid rules.

Capital for Enterprise Fund

The Capital for Enterprise Fund (“the Fund”) comprises £75 million of equity, made up of £50m of Government funds and an additional £25 million from retail banks Barclays, HSBC, LloydsTSB and RBS. The purpose of the fund is to provide equity and quasi equity of between £200,000 and £2 million to small- and medium-sized British companies with viable business models and growth potential in need of long term capital.

£60 million of the Fund is managed by professional experienced fund managers, Octopus Investments and Maven Capital Partners UK (formerly Aberdeen Asset Managers). Each company oversees the management of a £30 million fund. The remaining £15 million will be invested directly by, Capital for Enterprise Fund Managers, on a co-investment basis

Working Capital Scheme

The UK Government in conjunction with UK banks and the European Investment Bank is working to maintain existing lending and make new funds available to small and medium sized businesses through a £10 billion Working Capital Scheme. The government will guarantee up to 50% of loan portfolios submitted by the participating banks, made up of loans to sound, creditworthy companies, which the bank has chosen to include in a portfolio which it has put forward to the Government and has been assessed and approved by Government.

The guarantee is intended to secure £20 billions worth of working capital credit lines for companies - ensuring they are safe from reduction or withdrawal. In addition, the guarantee will free up capital which the banks must use for new lending as a condition of the scheme. This is lending which would otherwise not have been available.

National and Local Government Grants & Soft Loans

Grants and "Soft" Loans are available to qualifying businesses from a number of sources, including the European Union, UK national organisations, Local Authorities, enterprise agencies etc. In all there are over 2,500 different grants and loans available. They are usually for a specific project or activity and the funding body will normally contribute only a percentage of the total project cost. This can be up to 75% in the case of Feasibility Studies but normally they are up to a maximum of 50%.of the project cost.. Grants are subject to strict guidelines and criteria which must first be met by the applicants before any grant aid is made, and these vary for different types of grant. In general a Business Plan will be required and the applicant must satisfy the granting body that they are solvent and able to meet the non grant aided part of the project cost out of own resources (either internal or negotiated bank funding) and most importantly the project must not be commenced before the grant has been approved.

Since 5th July 2010  the picture in Wales has changed somewhat as the Welsh Assembly Government announced a significant policy change and many of the grants previously available have been discontinued. A definitive position has not yet been determined other than that the availability of Local Authority grants has as yet remained unchanged.