SFLGS enables all the leading high street banks and a range of other specialist lenders to lend to small businesses with viable business propositions that would not otherwise be able to borrow because they lack the security the lender requires. It is the lenders decision whether to consider using SFLGS to facilitate any individual loan. If the lender considers use of the SFLGS appropriate they must establish eligibility using an online tool provide by the DTI’s Small Business Service. The SFLGS covers a maximum of 85% of the lenders exposure, with the borrower paying a 2% premium to the Government. The commercial aspects of the loan are matters between the borrower and the lender.

Over 100,000 guarantees have been issued since the scheme started in 1981, enabling around £4 billion of lending to over 90,000 businesses.

With effect from December 1st 2005 the criteria for the SFLGS were changed by the Government in accordance with recommendations made by the Graham Review.

The main changes introduced to the scheme are listed below:

Removing the limit on the level of borrowing that individuals can be associated with (the so called “connected persons” rule), thus centring the lending decision on the quality of the business case, not the previous borrowing history of the individuals involved with the business.

Reserving resources to incentivise a range of new lenders to join the scheme.

Reserving resources to enable additional SFLGS lending by Banks that demonstrate a clear focus on high growth SME’s.

It is important to note that several existing regulations still apply to the scheme despite the above far reaching changes being adopted, namely:

SFLGS are available over a period of 2 – 10 years.