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3rd November 2005 - £250K SFLG Loan simplified

Much awaited changes and simplification of some rules

Simple, single limit of £250K

From now on, a single ceiling of £250,000 will apply to all SMEs. Previously, loans were available for periods of between two and ten years on sums from £5,000 to £100,000 (or £250,000 if the business has been trading for more than two years). The SFLG guarantees 75 percent of the loan. In return for the guarantee, the borrower pays the DTI a premium of 2 percent a year on the outstanding amount of the loan. The commercial aspects of the loan are matters between the borrower and the lender.

Jettisoning 'connected persons' rule

New rules remove the limit on the level of borrowing that individuals can be associated with (the so called 'connected persons' rule), enabling the lending decision to be based on the quality of the individual business. Previously, the borrowing history of individuals involved with different businesses was taken into account, but now each business will be treated on its merit.

£5.6 million turnover (revenue) limit

In future, an annual limit of £5.6m will apply to all eligible businesses or to the group if a business is part of a group. In other words SMEs with revenues greater than £5.6 million are not eligible for SFLG. Previously, an annual turnover was limited to £5m for manufacturing business and £3m for other eligible businesses and this created arguments and disagreements as to which business was in manufacturing and which was not, thus creating uncertainty and a lot unnecessary back and forth paperwork.

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