The DTI’s Small Firms Loan Guarantee Scheme (LGS) operates to provide UK banks and a number of similar lenders with a 75% guarantee where satisfactory applications are made to the DTI. These are generally where the bank concerned believes the proposition is one that it would normally support although cannot do so due to a lack of available security. Many companies have benefited from this over the years.

However, the changes due to take effect from 1 December, however, are huge, as Nick Hulme, Corporate Finance Director, explains.

“Changes that will make the scheme more accessible to more and more companies are there will be a single limit of £250k per company, whereas previously newer companies (under 2 years old) were restricted to £100k, and that the so called connected persons rule will be removed. The downside though is that businesses that have been trading for more than five years will be excluded from the scheme altogether. This is a fundamental change in the availability of the LGS and is a major cause for concern. Not least as the LGS has been used effectively for many years to assist business purchases (specifically not share purchases, though) although it appears this use could now be severely restricted.”

For further information please contact Nick Hulme

02/12/2005