Background information

Launched in 2009, the Enterprise Finance Guarantee scheme (EFG) , run by the government's British Business Bank, is a state-guaranteed lending scheme for small and medium-sized enterprises (SMEs) with inadequate security to meet a lender’s normal requirements.

Content of measure

Start-ups are not eligible under this scheme and there are further eligibility criteria:

• The SME operates in the UK, with an annual turnover of no more than GBP 41 million (€45.1 million as of 13 June 2020)
• The SME operates in an eligible sector. Not eligible sectors are coal, forestry, fisheries, transport and agriculture
• The available finance is between GBP 1,000 and GBP 1.2 million (between €1,000 and €1.32 million as of June 2020)
• The finance is required for an eligible business purpose and the SME presents a sound borrowing proposal and business plan

EFG loans are delivered through accredited business lenders, with the government, that is the taxpayer, underwriting 75% of the loan. This means that the lender is only exposed to part of the risk, however, the borrowing firm always remains liable for the debt and pays a 2% annual fee to the government. The repayment period for the loans ranges between three months and ten years. Besides the business loans, other funding options are also available under this scheme, such as revolving credit facilities (for example overdrafts), invoice finance, and refinancing and debt consolidation.

Response to COVID-19

The scheme designed for SMEs is the Coronavirus Business Interruption Loan Scheme (CBILS), which is an extension of the Enterprise Finance Guarantee scheme. A business is eligible if it is based in the UK; has an annual turnover of up to GBP 45 million (€50 million as of 13 June 2020); and it has been adversely affected by the coronavirus pandemic, however, it would be viable under normal circumstances.

The temporary schemes designed for larger firms are the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the COVID Corporate Financing Facility (CCFF). A business is eligible for CLBILS if it meets the same criteria as those outlined under the CBILS but its annual turnover is over GBP 45 million (€50 million as of 13 June 2020). The available loan and other finance can be up to 25% of the company’s turnover, to a maximum of GBP 200 million (€220 million as of 13 June 2020).

Use of measure

Since its launch in 2009 until December 2017, the British Business Bank’s Enterprise Finance Guarantee (EFG) has supported the provision of over GBP 3.3 billion (€3.63 billion as of 13 June 2020) of finance to more than 35,000 smaller businesses in the UK. Bank credit drawn by SMEs under the scheme was GBP 226 million (€249 million as of 13 June 2020) in the year to June 30 2019, 70% less than the amount offered a decade earlier. In the three months between July and September 2009, 1,921 loans were given, with a combined value of GBP 203 million, a great deal less than the total of 442 loans worth a combined GBP 47.6 million (€52 million as of 13 June 2020) given between April and June 2019. The decline may reflect the fact that small businesses have become less inclined to use external credit since the financial crisis.

According to the most recent economic impact evaluation, companies benefitting from the scheme demonstrated approximately 7% faster employment and turnover growth than those who did not use it. The positive impact was larger for relatively young and small firms, perhaps because they typically face financial constraints due to a combination of a lack of credit history and limited collaterals. The evaluation found that the majority (63%) of firms accessing EFG had fewer than 10 employees, 32% had between 10 and 49 employees and 5% had more than 49 employees.

According to statistical data about the CBILS, 60,409 businesses participated in the scheme by 16 August 2020 and the total value of loans provided was GBP 13.7 billion (€15.7 billion, as of 24 August 2020).

As for the CLBILS, 516 businesses participated in the scheme by 16 August, 2020 and the total value of loans provided was GBP 3.6 billion (€4.0 billion, as of 24 August 2020). Finally, according to data from the Bank of England, by 19 August, 2020, CCFF funding was awarded to 283 businesses, at a total value of GBP 17.5 million (€19.3 million, as of 24 August 2020).

The scheme is proven to enable companies to employ more people and generate higher turnover. According to a survey conducted in 2013, more than 80% of businesses benefitting from the scheme were satisfied with their EFG loan.

The British Business Bank publishes case studies of companies benefitting from the schemes. A case study of a company benefitting from the EFG Scheme: Biowise . A case study of a company benefitting from the Coronavirus Business Interruption Loan Scheme: Active Food Systems .

Target groups

Workers	Businesses	Citizens
Does not apply to workers	SMEs	Does not apply to citizens

Actors and funding

Actors	Funding
National government	National funds Other

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Unknown	Unknown
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• Unknown
• Main level of involvement: Unknown

Involvement

Unknown

Views and reactions

Unknown

Sources

• 01 November 2013: Improving access to finance for small and medium-sized enterprises (www.nao.org.uk)
• 01 November 2017: Economic impact evaluation of the Enterprise Finance Guarantee (EFG) scheme (www.british-business-bank.co.uk)
• 20 March 2020: Guidance: Apply for the COVID-19 Corporate Financing Facility (www.gov.uk)
• 23 March 2020: Guidance: Apply for the Coronavirus Business Interruption Loan Scheme (www.gov.uk)
• 25 March 2020: Joint letter to the UK banks from HM Treasury, the Bank of England, and the FCA (www.gov.uk)