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EFG loans require personal guarantees

18 March 2009

Small business organizations are complaining about all the obstacles getting in the way of accessing a loan under the Enterprise Financing Scheme launched by the government a couple of months ago. According to latest statements made by representatives of the Forum of Private Business as well as various small business owners, banks’ requirements of personal guarantees for loans under the EFG scheme are on the top of the problem list.

In an attempt to manage risks of payment default, banks that are providing EFG-backed funding are demanding important personal guarantees from the beneficiaries. So even though the main idea of the scheme is that 75 percent of the loans are to be backed up by the government, small businesses may still be required to provide personal guarantees of up to 100 percent of required loans. This is because, as RBS and NatWest chairman of business banking explains, the lenders need to be protected against potential business owners not fulfilling their obligations and added that this is done at the strong request of the government.

With this new hang-up in the spotlight, most businesses in need of financing are feeling let down by the system and the Forum of Private Business requested that banks wave personal guarantee conditions as, according to the FPB’s chief executive, “The scheme should provide struggling but viable businesses with the money they need”. In response, a spokesperson representing the Department of Business, Enterprise and

Regulatory Reform stated that according to commercial lending criteria banks are allowed to ask for such guarantees and are encouraged to do so in order to protect the interests of the taxpayers as well as those of business owners.



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