Understanding the Basics of the UK Business Finance Guarantee Scheme
As a small business owner in the UK, securing finances to start and grow a business can be a daunting task. One of the hurdles that small business owners face is the lack of collateral to secure financing. Fortunately, there is an option for businesses that have difficulty securing financing – the UK Business Finance Guarantee Scheme. In this article, we will dive into the basics of the scheme and how it can benefit small businesses.
What is the UK Business Finance Guarantee Scheme?
The UK Business Finance Guarantee Scheme is a government initiative that aims to provide access to funding for small businesses that would otherwise struggle to secure financing. The scheme works by guaranteeing the lender a portion of the loan in the event of borrower default. This assurance enables lenders to take a less stringent approach to collateral requirements.
Eligibility Requirements
Not all small businesses are eligible for the scheme. To qualify, a business must meet the following criteria:
- Have an annual turnover of up to £41 million.
- Be registered and operated in the UK.
- Be able to demonstrate that they have been impacted by COVID-19 or Brexit.
How Does it Work?
The UK Business Finance Guarantee Scheme works by providing a partial guarantee to lenders. Under the scheme, the government guarantees up to 80% of the finance, and lenders are responsible for the remaining 20%. The scheme offers a range of financial products, including overdrafts and term loans. The government guarantees a percentage of the loan depending on the type of financing chosen by the business.
Benefits of the UK Business Finance Guarantee Scheme
One of the main benefits of the UK Business Finance Guarantee Scheme is that it makes it easier for small businesses to access financing. The scheme reduces the risk for lenders, which in turn makes them more likely to lend to small businesses. Additionally, the scheme allows businesses to secure financing without needing to provide as much collateral, which is particularly helpful for startups and young businesses.
Conclusion
The UK Business Finance Guarantee Scheme is a valuable tool for small businesses in the UK looking to secure financing. By providing a partial loan guarantee, the scheme makes it easier for lenders to take on more risk and lend to small businesses that would otherwise struggle to obtain financing. This scheme can play a vital role in helping small businesses survive and grow in these challenging times.
