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Invoice Finance and EFG Funding

Wednesday, March 16th, 2011

It is now possible to get Enterprise Finance Guarantee Funding ( EFG) on the back of invoice finance facilities. Additional funding over and above the traditional 80/85% prepayment may be available.

This news may be a welcome relief to businesses that have approached their own high street banks for EFG fundin,g but for one reason or another have been refused. It must be remembered that as far as banks are concerned the availability of a government guarantee doesn’t make a bad deal good. For a business to be available for EFG funding via a high street bank, they must meet that banks normal lending criteria and if there is a lack of security in the deal then that is where the EFG funding kicks in.

If you don’t meet the banks’ normal lending criteria then it won’t get past first base. The problem is that it appears that many commercial high street bank managers don’t know what they can and can’t do and rather than saying no, they string the customer along on a merry dance.

There are currently two invoice finance companies offering EFG funding on the back of invoice finance. One provider will provide an overpayment to a maximim of 100% of the outstanding debtor book whilst the other will provide EFG funding equivalent to any director’s loans that there might be in the business.

Obviously these companies use slightly different criteria and it doesn’t take a rocket scientist to work out which invoice finance company might be best for you.

Factoring and EFG funding

Thursday, March 18th, 2010

It is most commonly believed that the only way to obtain EFG funding is via the banks. On the basis that two high street banks have written nearly 80% of all EFG funding it is easy to understand why. However it is not commonly known that it is possible to obtain EFG funding on the back of a factoring or invoice financing agreement. This may prove very beneficial because the banks can be difficult to obtain funding even when the additional security of the EFG guarantee is available.

There is a misconception that because an EFG guarantee is available from the government  that funding will automatically be approved. This sadly is not the case. Any application for business finance via the banks  must firstly meet with that particular banks strict lending criteria. Providing that the application ticks all the boxes in terms of meeting the bank criteria and the only reason the bank can not  do it is because of lack of tangible security then this where the EFG loan guarantee scheme will kick in. So if the application is a basket case it wont get passed the first hurdle.

Therefore if your application for EFG funding has been unsuccessful via the banks it may be worth looking at efg funding via a factoring or invoice discounting facility. Independent factoring and invoice discounting companies tend to be more flexible than the banks so you have absolutely nothing to loose.

Grants for Improving Your resource effeciency

Monday, March 15th, 2010

If your business is planning to make a capital investment that will reduce carbon emissions, waste or water consumption than your business may be eligible for a grant. The project must contribute to reducing CO2 emmissions  and generate wider environmental benefits.  XL Business Finance has teamed up with a firm of  local accountants that specialise in obtaining grants and business funding. Experience shows that if a specialise company apply on your behalf you have a much greater chance of success. Combined with equipment finance from XL Business Finance a project that otherwise may have been out or reach suddenly becomes a possibility.

There are however a number of criteria. Projects that have already started will not be eligible  and cannot be funded. The minimum capital expenditure spend must be at least £20,000 There are also a number of restrictions to the grants which include production of synthetic fibres, textiles and clothing, shipbuilding, coal and steel, agriculture, food processing, banking ( bankers don’t deserve any money in any case), insurance , education, local social welfare. In addition all other possibilities of funding must have been exhausted included bank loans and EFG funding. So long as the project is either for  water usage, energy generation and control, recycling, information technology, transport or waste reduction then it is worth giving us a call.

Is EFG Funding working?

Saturday, November 28th, 2009

EFG Funding was supposed to rescue many business from the economic gloom. It was supposed to provide a life line and the ability for businesses to borrow  money where they wouldn’t have normally been able to. So whats been happening?  We get many calls from businesses wishing to apply for EFG Funding wondering why their own banks have declined them. In reality there are two banks who have accountable  for 90% of the lending to date. If you want to know which ones they are then give us a call and we will be happy to have a chat.

Many businesses are under the misconception that EFG funding is there to help them irrelevant of their financial status. The reality couldn’t be further from the truth. Before a business can be approved for EFG funding it must go through all the banks normal stringent lending criteria. In addition they will need to obtain a minimum of 30% of the total funding as a contribution to the project. And when I say the banks sstringent lending criteria I mean the banks stringent lending criteria. Your business will need to have been trading for more than 3 years , it must be profitable and from the banks point of view you must be able to evidence to serviceability and must have a very strong rational for the investment.

Now if you tick all the boxes from the banks point of view and there is a desire to lend you money then EFG funding may be offered but only if  there is a lack of securityin the deal. The bank must have exhausted all possible avenues for security including any  security that the directors may be able to offer including property!!!!

IS EFG Funding Working?

Wednesday, July 22nd, 2009

We have received numerous enquiries about Enterprise Finance Guarantee Funding ( EFG).  EFG was supposed to be a more flexible replacement of the old Small Firms Loan Guarantee Scheme. The new scheme opened funding up to a larger cross section of businesses and is less restrictive in terms of eligibility.

The scheme was to provide additional security to the banks to enable them to be more flexible when approving business loans. For example if a bank liked the look of a deal and the only reason they couldn’t get approval was because of lack of security then this is where the SFLG kicks in. It may also be worth mentioning that all other forms of tangible security from the business and its directors need to have been exhausted. Therefore if a director has plenty of equity in his personal house  the bank must use this before a business is eligible for the EFG funding. However the EFG doesn’t provide security for the whole of the loan still leaving the finance company with a certain amount of exposure. This leaves us with a bit of a problem.  Banks being banks want their cake and they want to eat it. Not only do they want the maximum mount of security, the loan must meet all their normal lending criteria before they will even consider a customer for EFG funding. Therefore if the deal doesn’t stack up in their eyes it won’t even get passed first base.

All the banks publically advertise that they do the EFG funding but in reality only 2 of the high street banks are responsible for 90% of the advances. This doesn’t help if you are not with one of these two banks.  In addition we have been seeing a number of approvals recently from high street funders offering very high rates comparable to sub prime funders. They are effectively saying we don’t want to do this deal.

Payroll Finance

Tuesday, July 14th, 2009

Payroll Finance sounded too good to be true. Unfortunately that is exactly the case. Smartflow Payroll Finance is now in administration. Although an unsecured payroll finance facility appeared very attractive perhaps it was always destined to fail or is it another victim of the credit crunch?

Payroll funding provided a finance facility with up to two months of a businesses gross payroll. For example if the gross payroll was £100k a facility of up to £200k may have been possible. On the basis no personal guarantees were required from the directors the facility provided a viable alternative  to bank overdrafts. It also provided an alternative for busineses that were unable to use factoring or invoice discounting facilities as a means to fund its working capital requirements. Furthermore as Smartflow was providing a service they were in fact a trade creditor and as such it did not affect any of a customers banking covenants.

As with any of these specilaist funders Smartflow will have gone into the market to borrow funds and lend them to their customers at higher rates. Therefore the rates were expensive, howver as the facilities were unsecured they were certainly not excessive. It is my guess the high rates attracted the poorer covenants and it would only take one or two deals to fall over and the rest his history.

The problem now is that the demise of Smartflow potentially leaves many customers with a funding gap. XL Business Finance, as a specilaist independent broker has been busy helping customers restructure their finances. In extreme cases we have recommended that advice be taken from a corporate recovery specilaist who  can help with any VAT and PAYE arrears which may have occurred. Refinancing existing machinery is always an option but is only workable if there is value in the equipment. Alternatively funding via the Enterprise Finance Guarantee (EFG) scheme may be possible. Obviously factoring or invoice discounting is always an option. Even if you have been told you are not eligible it is always worth contacting us because there are many specilist funders capable of doing deals the high street banks dont want to fund.


XL Business Finance Ltd is a privately owned and independent business financing company with established links to many of the UK's leading finance houses. XL Business Finance provides a viable alternative to high street banks that lack the flexibility and imagination to provide a solution to most business users requirements. XL Business Finance can provide a full range of business financing solutions and we ensure a high level of customer service and pride ourselves on quick decisions. Our independent status will ensure any offer of funding and asset finance leasing is best suited to our customer’s needs.

XL Business Finance Limited are authorised and regulated by the Financial Conduct Authority FRN 718737).

XL Business Finance, Eaton Place Business Centre, 114 Washway Road, Sale, Cheshire M33 7RF UK.


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