10/02/2011

By Sancho Simmonds, Director and Business Adviser at Smith & Williamson

A number of Government-backed loan and grant schemes are available to help small and medium-sized enterprises (SMEs) access finance. In addition to the main two UK-wide initiatives — the Enterprise Finance Guarantee (EFG) scheme and Enterprise Capital Funds (ECFs) — there are separate programmes in England, Wales, Scotland and Northern Ireland.

Enterprise Finance Guarantee Scheme

The Labour Government set up the EFG to encourage more bank lending to SMEs lacking collateral or a track record. Under the scheme, the Government guarantees 75% of an SME's bank loan.

It is open to companies with an annual turnover of up to £25m. Loans from £1,000 to £1m are available , repayable over ten years. The scheme can be used to access new loans, refinance existing loans, convert overdrafts into loans, gain a new overdraft or extend a current one, and cover cash flow shortages. It is available to all sectors of the economy with a few exceptions.

At the end of 2010, the Coalition Government announced that the EFG would continue for another four years, making about £2bn available to viable businesses. It aims to help 6,000 SMEs each year to access capital.

Enterprise Capital Funds

Enterprise Capital Funds (ECFs) provide equity finance to SMEs by using Government funding alongside private sector investment to help fill the so-called ‘equity gap' — where businesses with viable investment propositions are unable to attract investment from informal investors or venture capitalists.

Government agency Capital for Enterprise runs the scheme through which the Government now invests in nine venture capital funds. To apply for ECF, SMEs must approach one of these funds directly. £150m of public funds have been invested in the scheme and the Coalition Government recently announced that another £200m will be available over the next four financial years.

Business Growth Fund

At the end of 2010 the Government announced a new bank-led £1.5bn ‘Business Growth Fund’ to provide equity finance to established SMEs who need capital to secure their plans for growth. The Government will work with other parties, such as the European Investment Fund, to potentially increase the scale of this.

Regional Growth Funds

The Regional Growth Fund is a new £1.4bn three-year fund that will operate across England to stimulate private sector led sustainable economic growth and employment.

SMEs and larger companies can apply on their own, or in partnership with other firms and/or public sector bodies.

Local authorities also usually have grants available for small firms, as do the nine English Regional Development Agencies, who can also advise on what European grants may be available. However, these RDAs are being abolished by March 2012 and will be replaced by new Local Enterprise Partnerships between local authorities and business groups.

Other funding sources

The Grant for Business Investment

This scheme, which comes under the Solutions for Business Initiative, provides money to obtain equipment, rent or buy premises, promote the creation of new jobs, and maintain existing employment. Grants must help a business expand, modernise and become more efficient. Sums available start at £10,000, and there is no upper limit.

The Government Grant for Research and Development

Individuals and SMEs can apply for the Government Grant for Research and Development (GGRD) which finances the creation of technologically innovative products and processes. In England, there are four types of business grants available under the GGRD — micro, research, development, exceptional development.

Domestic and European initiatives

• The Department of Health funds research and development projects that improve medical knowledge.

• The National Endowment for Science, Technology and the Arts has a range of grants to encourage projects for new products, services, and processes.

• The European Commission’s Framework Programme offers support to UK companies who would like to work on research and development projects with European partners.

• The European Union’s eContent scheme gives finance to help the expansion of the European digital content sector.

For more information, contact Sancho Simmonds on 020 7131 4590
at sancho.simmonds@smith.williamson.co.uk
or visit:

www.bis.gov.uk
www.capitalforenterprise.gov.uk
www.nesta.org.uk

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